Sol and Shekel Plummet to Low Levels

Sol, the major currency of Peru declined to its weakest level in more than a year mainly because of the slowdown in the economic growth. Apart from that, there are speculations that the Federal Reserve will reduce the monetary stimulus and this has caused a selloff in the bonds of Peru. Sol went down by 0.8% against USD and the same is now at 2.7720 per USD. This is the lowest level for Sol on closing basis since October, 2011, as far as prices from Datatec are concerned. The recent drop has extended the overall monthly decline to 2.8%.

As mentioned by the Trader at the BBVA Banco Continental, Walther Benavides, yields are on a rise and as a result, Sol is experiencing fall as well. The foreigners with positions in the local currency are currently afraid as they are losing on both the fronts. The yield on the benchmark Sol which is due in August, 2020 experienced a rise of 20 basis points and the same is now at 4.43%, marking the highest value of the same since 7th September. On 19th April, the yield incidentally declined to a record low figure of 3.67%.

Peruvian economy expanded by 4.8% in the first quarter of 2013, if compared to the value of a year earlier. This is the slowest speed of economic expansion for this Latin American country and this has happened because of the fall in exports and ease down of investment growth.

On the other hand, the major currency of Israel, Shekel is currently heading towards it biggest monthly loss in the last 12 months as the Central Bank has unexpectedly cut the base lending rate twice in this month in an attempt to prevent currency appreciation from the undermining growth.

Shekel has declined by 2.7% in May and is all set to experience the biggest drop since May, 2012. Shekel increased by 0.3% and is currently at 3.6832 per USD. In the 1st quarter of this year, Shekel advanced by 2.4%, marking the 2nd biggest gain among the major Latin American currencies, just after Mexican Peso.

As mentioned by the Chief Economist of DS Securities & Investments Ltd., Alex Zabezhinsky, the interest rate decision of the Central Bank taken in this month succeeded in moderating the sharp appreciation that Shekel was experiencing; weaker Shekel being more helpful for exporters.