Colombian Peso Weakens as Oil Prices Edge Higher Amid Geopolitical Tensions

The Colombian peso slid to 4,127.12 COP per USD this morning, reflecting a sharp depreciation of 55.09 COP (1.35%) from the prior session. This decline coincided with rising oil prices, driven by geopolitical tensions.

Supply concerns also increased after a Ukrainian drone strike on Russia’s Ryazan refinery. The attack disrupted operations at the facility, which processes over 300,000 barrels of oil daily, raising fears of broader supply disruptions.

Oil prices edged higher on Monday, with West Texas Intermediate (WTI) crude closing at 70.70 per barrel, up 0.42%, and Brent crude settling at 74.31 per barrel, gaining 0.35%.

Early Tuesday trading saw both benchmarks extend their gains, with WTI rising to 71.13 and Brent climbing to 75.16 per barrel. These increases highlighted market concerns over potential supply shortages stemming from the Ryazan refinery shutdown and broader geopolitical instability.

Despite higher oil prices, the peso struggled due to external and domestic pressures. The U.S. dollar strengthened globally, supported by robust economic data and rising Treasury yields, with the 10-year yield reaching 4.18%.

This bolstered demand for the greenback and added pressure on emerging market currencies like the peso. Domestically, Colombia’s central bank maintained its benchmark interest rate at 10.25%, prioritizing inflation control amid persistent price pressures of around 10%.

Colombian Peso Faces Pressure Amid Market Speculation

However, this decision offered little support for the peso as traders speculated about potential intervention if USD/COP breaches critical resistance levels near 4,130 COP/USD.

Trading activity reflected heightened market attention, with volumes reaching approximately 600 million on February 24 and lighter overnight trading in Asian markets ranging between 80–100 million.

Analysts identified technical resistance at 4,150 COP/USD, while support lies near 4,100 COP/USD, suggesting further downside risk for the peso. The peso’s decline underscores Colombia’s vulnerability to external shocks, particularly fluctuations in oil prices and global risk sentiment.

With the economy projected to grow by only 2.8% in 2025, combined with high inflation and geopolitical uncertainties, challenges for the currency are likely to persist. Market participants will closely monitor oil price movements and any signals from Colombia’s central bank as volatility remains elevated in USD/COP trading.

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