Exchange rate fluctuations: the Peruvian sol and the dollar in constant oscillation.

At the beginning of July, the exchange rate between the Peruvian sol and the US dollar experienced a notable drop, reaching a value of S/ 3.84. This phenomenon was explained by several factors, one of the most relevant being the slight recovery in the prices of two of Peru's main export products: copper, which was priced at £4.65, and gold, whose value was $2,412. This improvement in commodity prices generated a positive effect on the Peruvian economy, which in turn strengthened the local currency. Additionally, the Central Reserve Bank of Peru (BCRP) decided to pause interest rate cuts, keeping them at 5.75%, thereby avoiding a loss of differential against the United States, where the rate was 5.50%. As a result, the dollar temporarily weakened, allowing the sol to appreciate. However, what many analysts considered a temporary correction transformed into a rebound in the exchange rate. Starting from mid-July, the dollar began to gain ground again, increasing its value to S/ 3.78. The reasons behind this rebound are diverse, but one of the most notable was the publication of economic data in the United States that exceeded expectations, such as a Gross Domestic Product (GDP) growth of 2.80%. This data suggested that the US economy was more active than anticipated and raised expectations that the Federal Reserve would maintain high interest rates for an extended period, which strengthened the dollar in the international market. On the other hand, the political uncertainty in the United States has also influenced the dynamics of the exchange rate. The recent wave of media attention surrounding the attack on Republican candidate Donald Trump, as well as proposals to increase tariffs and strengthen the dollar, led many investors to seek refuge in the US currency. Additionally, the announcement of Joe Biden's resignation and the potential candidacy of Kamala Harris have generated more volatility in the markets. In times of political uncertainty, investors' tendency to opt for safe assets, such as the dollar, has contributed to its appreciation against currencies like the Peruvian sol. Looking to the future, it is anticipated that the exchange rate could be between S/. 3.90 and S/. 4.00 by the end of 2024 or early 2025. This projection is based on several factors, including the possibility of a reduction in interest rates by the Federal Reserve starting in September. If the BCRP decides to cut its rates more quickly than the Federal Reserve, the rate differential could widen, further favoring the dollar in the local context. Economic and political stability in the United States, despite electoral volatility, will continue to play a crucial role in strengthening the dollar. From a technical perspective, graphical analysis reveals a resistance level around S/. 3.82 that has been reached multiple times without being decisively surpassed. This resistance range reflects the consolidation of the exchange rate in the short term. On the other hand, a significant support level has been identified near S/. 3.70, a level that has maintained the stability of the dollar price on various occasions, suggesting it could be a point of downward resistance in the immediate future. In the long term, the monthly chart indicates that resistance is at S/. 3.89, which represents the highest point reached in the past year. This long-term resistance, along with significant support at approximately S/. 3.66, provides a clear outlook on how the market has behaved recently and where it might head in the future. In conclusion, the exchange rate between the Peruvian sol and the US dollar has gone through a series of fluctuations driven by both local and international factors. While the sol benefited from a favorable situation in commodity prices and the monetary policy of the BCRP, the recent rebound of the dollar emphasizes the influence of the US economy and political uncertainty in the exchange rate dynamics. Projections suggest that this dynamic could continue, posing challenges and opportunities for economic actors in Peru.