with good capon lined

Chart of the day is…….

….the Peruvian Nuevo Sol versus US Dollar, three month time period.
The Nuevo Sol (PEN) briefly went under three to the greenback yesterday before closing a touch above, the first time it has traded under 3 since October. The main reason for the surge in the Sol is that local banks are now unwinding dollar positions as they feel more confident about the worst of the recession being behind them. Well, good luck to them on that score is all I can say.

Also part of the equation are the still relatiely high interest rates on offer for foreign investors. Central bank chief Velarde cut an agressive point off the benchmark rate last metting around, but rates still lie at 5%, much higher than place like Chile, for example.

Going forward, exporters will start to moan and whine about lost competitivity if the trend continues and the last thing Peru needs is to be priced out of foreign markets. So we can expect rates to drop quickly from here.

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