Peru's sol falls to new six-year low ahead of central bank rate decision

Peru's currency continued the slide in February as investors shrugged off a mild recovery in copper futures and focused on overall economic challenges - the sol fell to a new six-year low against the dollar on Monday.

USD/PEN rallied to 3.0911 on 9 February, down 0.65% on the day and 0.9% so far in the month. Since January, the sol has dropped 3.3% against the dollar.

Peru is the third largest producer of copper in the world. It makes up a large proportion of the country's total exports.

Copper prices have been declining over the past four years and at the five and a half year low of $2.418, the one-month futures was down 48% down from the 2011 February peak.

Peru's annual GDP growth rate has fallen to a five-year low of 1.76% in the third quarter of last year after registering near 7% growth in the first quarter.

To shore up growth, the central bank did a 25 basis points cut in the reference rate in the policy decision in January. The main rate was at 4% when the easing cycle started in mid-2014 and it is now at 3.25%.

Peru's central bank meets on 12 February to review monetary policy and the big slide in the currency will likely be a topic of discussion.

The USD/PEN pair has been holding a range of 2.7520-2.8210 for more than a year until August last year, and from their the sol has fallen 9.4% by Monday.

Analysts see the sudden shortage of anchovies, a major catch by the Peruvian fisheries that yields a good share of revenue to the economy has also weighed on the economy.