The price of the dollar rose in Colombia: Is it a good time to buy?

The price of the dollar in Colombia has experienced notable fluctuations in recent months. With the expectation of possible increases in its value, many are wondering if it is the right time to buy dollars.

Experts point out that the country’s fiscal situation and decisions on interest rates in the United States will be decisive for the future behavior of the exchange rate.

Below, we analyze the recent evolution of the dollar price and offer analysts’ perspectives on whether it is the best time to make this investment.

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Recent evolution of the price of the dollar

The price of the dollar in Colombia has shown significant variations, as can be seen in the data of the Representative Market Exchange Rate (MER) for the last 6 months published by Banco de la República:

During July 2024, the price of the dollar has oscillated between 3.944 and 4.040 COP/USD, showing a volatile behavior.

What is expected for the price of the dollar in Colombia?

According to analysts, possible increases in the price of the dollar are anticipated throughout the year. Former minister Mauricio Cárdenas talked to La W about the economic outlook in Colombia, in view of the concern about the low tax collection in the country, which so far in 2024 has been the worst in 14 years.

Cárdenas explained that this phenomenon is a result of the little movement of the production machine in the country. “The economy is slowing down and there are very inertial taxes that grow in spite of everything. The price of oil may fall and the dollar may rise (…) the collection is very low because the economy is down, the rest are explanations that the projection was poorly made”, he said.

Regarding the price of the dollar in Colombia, which has shown a downward trend in the last months, he affirmed that “if the fiscal situation continues as it is going, the dollar will go up”. He does not believe that it is a matter of days or weeks, but if by the end of the year the fiscal situation is not fixed and the 15 trillion pesos cut is not made, the dollar will go up.

Finally, he assured that “whoever is thinking that the dollar will continue to fall is mistaken”.

In the latest Monthly Survey of Economic Analysts’ Expectations of the Banco de la República, the majority projected that the price of the dollar in Colombia in July will close between $3,900 and $4,000.

Analysts who participated in Fedesarrollo’s June Financial Opinion Survey consider that the exchange rate will be at $4,080 by the end of 2024, which shows a slight increase compared to the previous month’s forecast ($4,000).

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Key factors in the behavior of the price of the dollar in Colombia

Economic data from the United States will be key to foresee how the exchange rate could behave in the coming months. This year the dollar has had ups and downs, so far this year, the minimum price of the Representative Market Rate has been $3.764 in April and the maximum of $4.175 last month.

Among the factors that have affected the behavior of the exchange rate are the decisions on interest rates in the United States, the economic recovery after the pandemic, the behavior of inflation, wars and international tensions that affect the confidence of funds and investors, and the price of oil.

The behavior of the peso’s exchange rate against the dollar has been mainly influenced by the risk appetite of international markets. Recent news about the possibility that the U.S. Federal Reserve (FED) may lower interest rates in September, together with the outlook for the U.S. presidential campaign, generated volatility.

This Sunday, through the social network X, the President of the United States, Joe Biden, announced that he is withdrawing from the presidential race and giving up his aspiration for reelection, after weeks of pressure from within his own party, the Democrats, for him to step aside.

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