Colombian Peso Slides to 4,173 as Political Uncertainty Rocks Markets – March 21, 2025

The Colombian peso (COP) continues its downward slide against the US dollar this morning, trading at 4,173.62 COP per USD as markets open.

This represents a further weakening from yesterday’s close, with the USDCOP rising 0.67% to 4,180.15 in early trading from 4,152.24 in the previous session. The peso extended its losses during overnight trading as political uncertainty and weak oil prices continued to plague the Colombian currency.

Yesterday, the peso had already weakened to 4,163.20 against the dollar amid growing concerns over the country’s political stability. The currency has now fallen nearly 1% since Wednesday’s levels.

Previous Day’s Trading

Thursday saw the peso gradually decline throughout the day, starting around 4,156.25 and weakening steadily as rumors of a cabinet shakeup intensified. Trading volumes remained relatively stable at approximately 120 million dollars in the spot market despite the volatility.

Market Drivers

Political Uncertainty

The primary factor driving the peso’s decline continues to be the political uncertainty gripping Colombia. Whispers of the Finance Minister’s possible exit have unsettled investors since midweek. Market makers report that this uncertainty has been the main catalyst for the currency’s recent weakness.

Oil Market Pressure

The peso has faced additional pressure from declining oil prices, which directly impact Colombia’s export-driven economy. As Brent crude futures slid below key levels yesterday, the currency weakened further, reflecting the close correlation between oil prices and the Colombian peso.

Dollar Strength

The US dollar has been flexing its strength globally, fueled by expectations of tighter Federal Reserve policies, adding overnight pressure to the peso. This broader dollar strength has compounded the peso’s domestic challenges.

Market Commentary

“We’re seeing extremely thin liquidity this morning, with choppy trading conditions expected to continue throughout the day,” noted a senior dealer at a major Colombian bank, who quoted the rate at 4,162.50–4,163.90 early in the session.

Another trading desk head commented, “The combination of political noise and weak oil prices has created a perfect storm for the peso. Without clarity from Bogotá soon, we could see further weakening toward the 4,200 level.”

Fund Flows and Institutional Activity

Capital flight continues to affect the peso, with approximately 15 million dollars exiting peso-denominated funds this week, shifting to dollar assets instead. This outflow reflects growing investor concerns about Colombia’s economic outlook and governance stability.

Technical Analysis

From a technical perspective, the peso has breached its 50-day moving average of 4,120, signaling the potential for additional declines. Market technicians note that key resistance now sits at 4,180, while support at 4,130 is barely holding.

The Relative Strength Index (RSI) is approaching 60, indicating strengthening dollar momentum without yet reaching overbought territory.

Broader Economic Context

Colombia’s central bank continues to hold interest rates at 9.5%, set late last year, offering little immediate relief for the currency. Investors are closely monitoring both US economic data (particularly today’s jobless claims) and any announcements from Bogotá that might stabilize the political situation.

Outlook

Analysts remain cautious on the peso’s near-term prospects, with Trading Economics projecting the currency to trade at around 4,109.80 by the end of this quarter.

However, if political uncertainty persists, the peso could face additional pressure in the coming sessions. This pressure may intensify if oil prices continue to struggle.

The currency market will be watching closely for any cabinet announcements from Colombia today. These announcements could either exacerbate or alleviate the current pressure on the peso.