Peru Moves to Stem Currency Appreciation

Peru’s central bank said Wednesday evening it was taking a series of measures to help reduce what it calls speculative flows into the country and in turn stem the strong recent appreciation of the currency. The measures take effect starting in February. The minimum reserve requirement for existing and new deposits was raised to 7% from 6%. Banks’ minimum required central bank deposit percentage was raised to 2% from 1%. The marginal reserve requirement for Sol-denominated deposits was established at 15%, while the marginal reserve for dollar-denominated deposits was raised to 40% from 30%. Central bank president Julio Velarde reportedly denied Peru would implement outright capital controls. “The higher reserve requirement should increase the banking system’s demand for dollars and make it easier for the central bank to absorb new dollar inflows,” observes Credit Suisse. In the past week, foreign investors have been taking long PEN positions in the NDF market, betting on a continued appreciation of the Peruvian currency, a Wall Street salesperson tells LatinFinance.