COP: Back On Track
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As we suggested last week (see 'COP: Assessing The Damage', June 27), the rapid sell-off in the Colombian peso in late June was driven more by headline risk (which was overblown, in our view) rather than a significant shift in the currency's fundamental position. As such, we believed that the bout of FX weakness offered an interesting re-entry point for investors, as opposed to a sign of things to come. The COP's remarkable recovery this week (10% gains in a little more than three days trading) suggests that investor jitters over Colombian politics - in particular, question marks over the legitimacy of Colombian leader Álvaro Uribe's presidency - have faded as quickly as they spiked, and the focus is back firmly on the underling drivers of currency.