The dollar gains ground in Peru: safe haven or latent risk?

The dollar continues to strengthen globally and Peruvians have chosen to seek refuge in this currency amid economic uncertainty. The consecutive publication of economic data in the United States, combined with persistently high inflation, has led the greenback to continue its ascent, reaching levels that have spurred an increase in demand for dollars in the Peruvian foreign exchange market. Experts like Mario Guerrero, Deputy Manager of Monetary Economics at Scotiabank, have highlighted that the volume of dollar demand has significantly increased so far this year, putting pressure on the depreciation of the Peruvian sol. This trend has been driven by the search for financial security by local investors, who view the dollar as a safe haven amid economic volatility. Asvim Asencios, a Currency Trader at Renta4 SAB, has also noted that the purchase of dollars has risen, motivated by global and local uncertainty, as well as fixed financial obligations in this currency. However, experts differ on whether seeking refuge in the dollar is the best decision in the current context. While some anticipate that the dollar's value will continue to rise in the coming months, others suggest there could be a downward correction during March and April. This is due to factors such as companies paying income tax, which could exert downward pressure on the dollar's direction. It is also worth noting that the dollar's behavior in 2024 has been more volatile than anticipated, implying inherent risk in this investment. Although some Peruvians who bought dollars in December have seen a return of 5% in the first two months of the year, caution is advised, and it is recommended to avoid taking on debt in a currency different from the one in which income is generated. In conclusion, the decision to seek refuge in the strengthening dollar may offer profit opportunities, but it also carries risks. It is important to consider the current economic landscape and carefully evaluate whether this strategy is most suitable in each particular case.