Colombian Peso And Stocks Pause After Rally As Fed-Cut Bets Build

Key Points

1. Peso holds near 3,770 per dollar after a 1.3% surge, helped by a weaker dollar index just under 99.
2. COLCAP slips 0.5% but stays close to record highs after one of Latin America’s strongest equity rallies this year.
3. Banks and fuel distributors outperform while food and gold stocks lag, as investors reward cash generation and punish policy uncertainty.

The Colombian peso opened Thursday around 3,770 per dollar, consolidating sharp gains made on Wednesday after weak US jobs and manufacturing data.

Softer numbers pushed the dollar index into the high-98s and cemented market bets on a Federal Reserve rate cut next week, reviving demand for high-carry emerging-market currencies across Latin America, with the peso among the main winners.

Domestic figures give this move a solid foundation. GDP grew 3.6% year on year in the third quarter, the fastest pace in three years, while unemployment has fallen to 8.2%, its lowest October level in a decade.

Inflation has re-accelerated to about 5.5%, so the central bank has kept its policy rate at 9.25%, preserving attractive real yields and signalling a cautious, technocratic stance even as President Gustavo Petro pushes a looser fiscal line and warns of default risks to sell his tax agenda.

Technicals point to steady, not explosive, peso strength. On the four-hour USD/COP chart, the dollar has retreated from above 3,800 and is moving sideways just above support around 3,730–3,750, with momentum indicators fading and RSI in the low 40s.

The daily trend still points lower from the 3,900–3,950 area seen in October, while the weekly chart shows a broader topping pattern from levels above 4,100 earlier this year.

Equities are pausing rather than reversing. The MSCI COLCAP index fell 0.48% on Wednesday to about 2,105 points but remains close to fresh records after roughly 50% gains over twelve months, with weekly RSI readings clearly overbought.

Among individual names, Grupo Cibest, Bancolombia’s preferred shares and fuel distributor Terpel rose between 1.8% and 3.4%, extending record or multi-year highs, while food group Nutresa and gold miner Mineros led the laggards.

Offshore, the Global X MSCI Colombia ETF trades near the top of its 52-week range after a gain of more than 55% in the past year and around $40 million of net inflows.

For now, markets are betting that a conservative central bank and improving growth can outweigh fiscal drift and pre-electoral noise.

If the Fed delivers the cut investors expect, Colombia’s currency and equity market can probably hold their gains; any disappointment from Washington, or fresh evidence of budget slippage in Bogotá, would quickly test this new optimism.

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