Colombia Market Report: Peso Breaks Below 3,660 as Dollar Collapses; COLCAP Gains 0.92%

Colombian equities extended their recovery on Tuesday as the COLCAP climbed to 2,418.04, gaining 0.92% in a session driven by broad-based buying across financials and industrials.

This is part of The Rio Times’ daily coverage of Colombian markets and Latin American financial news.

For context on regional markets, see Brazil’s Ibovespa for the same session.

Also tracking regional peers: Chile’s IPSA closed the same session.

The index has now recouped a significant portion of the post-BanRep rate shock losses, though it remains 5.6% below its all-time high of 2,562 set on January 27. The session’s standout decliner was Ecopetrol, which fell 2.0% to COP 2,205 despite oil prices holding firm — a move that likely reflects profit-taking after the stock’s strong run from its January lows.

The day’s dominant theme was the continued disintegration of the US dollar. The DXY fell to 96.8 on Tuesday after losing more than 1% over the previous two sessions, driven by weaker-than-expected US December retail sales data that showed consumer spending unexpectedly stalled.

The GDP control group slipped 0.1%, job openings fell to their lowest since 2020, and private payroll growth undershot forecasts — collectively painting a picture of a cooling American economy. Money markets repriced aggressively, with the probability of three Fed rate cuts in 2026 now the consensus, up from two just a week ago.

For the peso, this dollar weakness is unambiguously positive. The TRM dropped to COP 3,651.90, down COP 18.3 from the previous day and its lowest level since early 2024.

The peso’s strength is being turbocharged by the widening rate differential — at 10.25%, BanRep’s policy rate is now among the highest real rates in emerging markets, creating an irresistible carry-trade opportunity in a world where the Fed is easing and the dollar is weakening.

The peso has now strengthened roughly 12.5% from its September 2025 peak above COP 4,200, and the year-to-date decline in USD/COP of 2.8% places the currency among EM outperformers.

Oil prices eased marginally on Tuesday as markets digested Monday’s US maritime advisory warning American-flagged ships to avoid Iranian waters while transiting the Strait of Hormuz. Brent settled at $68.91, down just 0.19%, after surging more than 1% on Monday on the Hormuz news.

The US-Iran negotiation track remains a two-way risk: a deal would deflate crude’s geopolitical premium, while a breakdown could send prices sharply higher.

The EIA’s latest Short-Term Energy Outlook, released the same day, forecasts Brent averaging $58/barrel in 2026 — well below current spot — implying that at $69, oil is carrying a significant geopolitical premium. For Colombia, current prices remain comfortably above Ecopetrol’s 2026 budget assumption of $60/barrel.

A new structural headwind for the dollar emerged Tuesday: reports that Chinese regulators advised financial institutions to limit holdings of US Treasuries to reduce concentration risks and shield against uncertainty around US economic policies.

If confirmed, this represents a tectonic shift in global reserve management that could further benefit EM currencies like the peso. Gold held near $5,050, supported by the dovish repricing of Fed expectations and continued central bank buying — China’s PBoC extended its gold purchases for a fifteenth consecutive month in January.

Domestically, the approach to the March 8 legislative elections and presidential primaries continues to shape the political backdrop. The right’s “Great Consultation for Colombia” features Paloma Valencia and Vicky Dávila as frontrunners, while the left’s Broad Front primary remains weakened by the exclusion of Iván Cepeda.

BanRep’s January Monetary Policy Report, presented February 5, reinforced the hawkish outlook — noting that annual inflation stopped decreasing throughout 2025, remained above the 3% target, and that the economy was operating in excess demand. The Board raised its 2026 year-end inflation forecast to 6.3%, suggesting the hiking cycle may not be over.

The COLCAP‘s push to 2,418 marks a decisive recovery from the 2,370 post-rate-shock lows, though the index remains 5.6% below its all-time high of 2,562. On the daily chart, price has reclaimed the area near the upper Bollinger Band (2,418.04) with the RSI at 70.41 — entering overbought territory.

The daily MACD histogram remains deeply negative at -19.24, signaling that the momentum divergence from the January highs has not been fully resolved despite the price recovery.

On the 4-hour chart, the picture is more constructive. Price is trading above the Ichimoku cloud and all major moving averages, with the RSI at a more neutral 53.96.

The MACD has crossed into positive territory (signal at 5.74, MACD line at 0.93), though the histogram shows only modest positive momentum. The key resistance zone sits at 2,437–2,525 — reclaiming the upper end of this range would signal a genuine retest of the all-time highs is underway.

USD/COP extended its decline to 3,660.9 on the ICE spot and 3,651.90 on the TRM, with the pair now firmly entrenched below the Ichimoku cloud on both the daily and 4-hour timeframes.

On the daily chart, the downtrend from the 4,200+ September 2025 highs remains intact, with price grinding lower beneath a declining Tenkan-sen (3,709.8) and Kijun-sen (3,725.4). The daily RSI at 47.72 is neutral but trending down, while the MACD histogram reads -15.3 with both signal lines in negative territory (-21.5), confirming sustained bearish momentum.

The 4-hour chart shows a more granular picture of the peso’s strength. Price is oscillating near the lower Bollinger Band (3,655.7), with the Ichimoku cloud acting as overhead resistance at 3,662–3,668.

The RSI sits at a near-neutral 51.29/48.93, suggesting the pair has room to move in either direction near term. The MACD on the 4-hour has crossed positive (3.4/1.2), hinting at a possible short-term bounce, though the broader trend remains firmly bearish.

Verdict

Tuesday’s session revealed a subtle but important divergence within the COLCAP rally: the index rose 0.92% even as its traditional bellwether, Ecopetrol, fell 2.0%. This suggests the bid is rotating into financials and industrials rather than being driven by commodity-linked names — a healthier dynamic for the index but one that relies on continued confidence in the domestic earnings recovery under BanRep’s punitive 10.25% rate regime.

The COLCAP’s recovery to 2,418 is encouraging, but the daily RSI at 70.41 warns the index is re-entering overbought territory without having fully corrected the excesses from the January highs. The negative MACD histogram (-19.24) on the daily chart suggests the rally lacks the momentum conviction to sustain a new all-time high push. The 2,437–2,525 zone is the test — and it will likely require clarity on two fronts before being reclaimed: today’s US CPI print and BanRep’s next decision.

For USD/COP, the TRM at 3,651.90 is approaching a critical technical juncture. The 2026 low near 3,603 (set in early February) is within reach, and a break below would open the door to levels not seen since mid-2023. However, the 4-hour MACD has turned positive, and the daily RSI at 47.72 is no longer in oversold territory — suggesting the easy pesos have already been made in this leg down.

Today’s US CPI is the binary event. A softer print would accelerate the dollar’s decline, potentially pushing USD/COP toward the 3,600 handle and supporting the COLCAP through improved risk appetite. A hotter print — even marginally above consensus — would likely trigger a sharp dollar reversal, unwinding some of the carry-trade positioning that has driven the peso’s rally. The EIA’s new $58/barrel Brent forecast adds a medium-term concern: if oil prices converge toward that level, Colombia’s fiscal accounts come under pressure, potentially weakening the peso’s fundamental story. With BanRep’s 6.3% year-end inflation forecast implying further rate hikes may be needed, the rate differential favoring the peso is likely to persist regardless of the CPI outcome. The base case remains peso-positive, equity-cautious.