The Colombian peso rose 2.5% against the US dollar in September: the reasons behind the government's monetary policy making a strong push.

In September 2025, the Colombian peso (COP) experienced a significant appreciation against the US dollar, with a monthly increase of 2.5%, attracting the attention of global investors. This article will delve into the reasons behind the peso's appreciation, the impact of government monetary policy, and the potential implications for businesses and investors.

1. Overview of September's Peso Trend

In the past month, the exchange rate of the Colombian peso against the US dollar rose from 4,900 COP/USD to 4,775 COP/USD, with a cumulative increase of about 2.5%. This appreciation trend is particularly prominent among major currencies in Latin America, and it has also become an important signal for investors to pay attention to the dynamics of the Colombian economy.

Market analysts point out that this round of appreciation is primarily driven by the government's active monetization policies, coupled with the global weakening of the dollar and capital inflows into the Latin American market. The rebound of the peso not only enhances the profit margins of import companies but also has a positive impact on foreign debt repayment costs.

2. The Core Role of Government Monetization Policies

The Colombian central government launched a series of monetization measures at the beginning of this year, with the core including:

1. Increase the supply of base currency By moderately expanding the base currency, the government injects liquidity into the economy to alleviate the funding pressure on domestic enterprises and the banking system.
2. Adjust monetary policy The central bank maintains a relatively loose interest rate environment to encourage corporate investment and consumer spending, thereby boosting economic growth momentum.
3. Foreign Exchange Market Intervention The government moderately intervenes in the market through foreign exchange reserve management to stabilize exchange rate fluctuations and enhance investor confidence.

These measures have combined to enable the peso to achieve a phased appreciation in September, while also providing support for boosting exports and maintaining economic stability.

3. Common Drivers of Market Factors

In addition to policy factors, the external market environment also affects this round of peso appreciation:

• US Dollar Weakness: In September, the US Dollar Index continued to decline, and abundant dollar liquidity led to a general strengthening of major emerging market currencies against the dollar.
• Capital inflow: Investor interest in Latin American assets has rebounded, particularly as Colombian bonds and the stock market have attracted a significant amount of short-term funds.
• Commodity Prices: The recovery in prices of major Colombian export commodities such as coffee and oil has increased foreign exchange earnings, providing support for the peso.

These factors, combined with the government's monetization policy, have jointly driven the peso to appreciate against the dollar in stages.

4. Implications for Enterprises and Investors

1. Import enterprises benefit The appreciation of the peso has reduced import costs, helping to alleviate procurement pressure on enterprises while also enhancing profit margins.
2. The cost of external debt decreases For dollar-denominated debts, an appreciation trend means that companies' repayment costs decrease, thereby improving their financial condition.
3. Investor Strategy Adjustment Investors should pay attention to the fluctuations in the Latin American currency market, reasonably allocate their investment portfolios, and also be mindful of exchange rate risk management to prevent short-term fluctuations from affecting returns.

5. Potential Risks and Precautions

Despite the peso's strong performance in September, investors should still be aware of potential risks:

• Strong policy dependence: The appreciation of the exchange rate is highly reliant on the continuous support of government monetary policy. Once there is a policy adjustment, it may lead to increased volatility.
• Uncertain external environment: Changes in the global economy and the trend of the US dollar may affect the appreciation trend of the peso.
• Market sentiment fluctuations: Capital inflows into the Latin American market are short-term, and investors should be wary of the investment risks brought by short-term volatility.

VI. Conclusion

In September, the Colombian peso rose by 2.5% against the dollar, reflecting the direct impact of the government's monetization policy and the market's recovery of confidence in the Latin American economy. While businesses and investors enjoy the dividends brought by the appreciation, they should maintain rational analysis, pay attention to changes in policies and market environments, and manage exchange rate risks reasonably. In the future, whether the peso can continue its strength will still depend on the robustness of the domestic economy and changes in the global financial environment.