USD/COP is now trading above 3,899.32, gaining 0.27% on the day.
The price of the Dollar in Colombia today, Tuesday, March 19, has oscillated between a minimum of 3,889.06 and a maximum of 3,917.66.
Colombian peso: Focus on the interest rate decisions of the Fed and the Bank of the Republic of Colombia
- The United States Federal Reserve (Fed) will publish its monetary policy decision tomorrow, Wednesday, March 20. Although no moves in interest rates are expected, the Fed's dot chart is expected to give clues to the number of rate cuts expected through the end of the year. The market is pricing in a decrease in rate cuts between now and the end of the year, which would favor the Dollar.
- He Friday, March 22, the Bank of the Republic of Colombia will announce its interest rates, expecting a cut of 25 or 50 basis points (bp) to 12.50% or 12.25% from the current 12.75%. In the last two meetings, the Colombian central bank has cut its rates by 25 bp consecutively.
- A rate cut in Colombia on Friday coupled with a reduction in the forecast of the number of Fed rate cuts until the end of the year could favor the Dollar against the Colombian Peso in the coming days.
US Dollar FAQ
What is the US Dollar?
The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions.
After World War II, the USD took over from the pound sterling as the world's reserve currency.
How do the decisions of the Federal Reserve affect the Dollar?
The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates.
When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.
What is Quantitative Easing and how does it influence the Dollar?
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed's weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.
What is quantitative tightening and how does it influence the US dollar?
Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
