The dollar exchange rate will continue with bullish momentum

Markets in the region focus on the dynamics of the dollar, the country's most widely used foreign currency, which continues to rise despite low oil prices and the tariff war between the world's two largest economic powers, the United States and China.

At the end of the day this Monday The market rep rate (MRR) closed at $ 3,240, up $ 17 from the MRT with which he started the week at $ 3,223.

The scheduled meeting between US Presidents, Donald Trump and China, Xi Jinping, where they will discuss the trade war and see if these tensions dissipate or if, on the contrary, intensify. This meeting will establish a road map for foreign investment in emerging countries, more exposed to risk.

In contrast, the Brent benchmark for the day was $ 60.64 and the WTI was $ 51.90.. Sebastián Salgado, founding partner of the service bank Finanvalue, said the current low oil prices are primarily due to overproduction in the market.

For the stockbroker, the "abysmal fall" in Brent and WTI reference prices is due to excess supply generated by countries such as Russia, Saudi Arabia and the United States, savings that have increased their reserves of oil reserves and caused adverse price effects.

On the negative correlation between hydrocarbon and US currency, Salgado pointed out that this momentum had been lost and that currently the falling price of one of the two variables was not directly affecting l & # 39; other.

"That's why the dollar deals with high prices compared to the 2,800 pesos it had in the middle of the year, but it's not because of the fall in the price of oil because there is no more direct relationship between the two badets, "explained Salgado.

"Production must be reduced"

In November, hedge funds withdrew more than $ 12 billion from the oil market, calculated on the basis of a record decline in long-term holdings of Brent and WTI.

The Organization of Petroleum Exporting Countries (OPEC) attaches great importance to the possibility of reducing its joint production of about 1.4 million barrels per day at a meeting that would take place on 6 December.

"Oil is no longer a benchmark against the dollar but we see that the price is related to US economic activity.Although, in mid-2014, the negative correlation between the two is 90 %, which means that if the price of one rose, the price of the other went down, there is now a positive correlation of 20%, but has no effect on the currency, "Salgado explained. .

The brokerage firm warned that the problem with the price of oil was that the national government estimated the average price of a barrel of oil at $ 65, "this could damage oil collection and dividend accounts according to the terms of the oil price. Ecopetrol, "he said.

According to Salgado, Ecopetrol has a cost center with a $ 35 oil. However, the current situation could affect the company's profit margins with respect to sales, accounts, national collections and budget forecasts for which to subtract from 2018 and early 2019.

To combat this current situation, it is badumed that at the next OPEC meeting, a concrete agreement meeting the needs of the market for the reduction of oil production can be concluded. "The excess supply is a slowdown in the global economy," Salgado said.

Capital flight

The positive correlation between oil and the dollar suggests that the price of the currency could fall however increases because of the scarcity of foreign exchange in the market. "Foreign investors are taking dollars out of the Colombian economy, not because of the oil effect, but because of capital flight," Salgado said.

Accelerated investors in Colombia are seeing safer rates of return in the United States, given their improving economy, which allow them to invest capital in that country.

The improvement in investment rates in North America has a negative impact on emerging countries, because "investors prefer the safest rates in the United States to those in Colombia, where, despite competitive rates, the risk is higher, "he badured. the investment dealer.

As a result of the dollar's rise, the Bank of the Republic has taken emergency measures for the future. Salgado pointed out that the entity had activated a mechanism for buying foreign currency through the operation for exporters (PUT).

In this type of transactions, the counterparty is allowed to sell dollars to the issuer. "The bank is accumulating reserves and drying up the supply of dollars on the market to encourage it to become much more expensive," Salgado said.

This mechanism has generated pressures on the national economy over the currency benchmark. Mr. Salgado pointed out that price increases could generate inflation in the Colombian economy and undermine the Bank's monetary control objectives.

Download the projection

According to Fedesarrollo's financial opinion survey, growth forecasts for the fourth quarter of this year rose from 2.9% to 2.8%. In addition, for 2019, the annual figure also decreased from 3.3% to 3.2%.

Foreign exchange badysts predict that the exchange rate will be between $ 3,150 and $ 3,200, with an average of $ 3,180.

In addition, they expect a range of $ 3,090 to $ 3,200 over the next three months, with an average response of $ 3,150, or nearly $ 150 over the previous month's forecast, with an average wait of $ 3,005. Forecasts for 2019 have also increased from an average of $ 3,050 to $ 3,100.

Writing of the opinion and summary of the agencies