For the eighth time in 10 months, Peru’s central bank has raised deposit requirements on dollar-denominated accounts to stem the flow of hot money into its fast-growing economy and dampen currency appreciation.
Readers already know that Brazil is at the helm of the currency war when it comes to Latin America. However, increasingly, Colombia, Peru and even Costa Rica are turning into brothers in arms, determined to ease the appreciation of their own currencies, the peso, the sol and the colón, respectively.
Like many emerging markets, Peru has been fighting a war – a currency war to be precise.
The country’s currency, the sol, jumped to a 15 year high last week after the US Federal Reserve said it would launch a third round of quantitative easing. And it looks like Lima has decided enough was enough.
The Andean country’s central bank changed its intervention strategy on Friday to increase volatility in the currency.