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Sliding Colombian peso makes flower exports more competitive

Currencies whose economies are helped by oil exports have all been hit by the slump in crude prices, but the Colombian peso has taken a particular battering in recent weeks.

And the currency fell for a fourth straight day on Thursday, to hit a fresh 11-year low of 2726.50 pesos per dollar.

Thursday's drop takes the peso's loss since the start of May to more than 12 per cent, handing it the dubious distinction of being the second-worst performing major emerging markets currency this year after the Brazilian real.

Colombian policymakers have responded by raising taxes and cutting spending.

Tiago Severo, analyst at Goldman Sachs, reckons the peso could fall to as low as 2,800 by the end of this year.

The view was shared by Mario Castro at Nomura, who said the ongoing weakness in oil prices, slowing growth in China and an impending rise in interest rates from the US Federal Reserve should all continue to weigh on the peso.

Interestingly, Colombian policymakers have so far been happy to let the peso slide because it is helping to make exports from the country's coffee, banana and flower industries more competitive.

Click here to read the complete article at www.ft.com.
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