March 12, 2020 / 10:15 PM / a month ago

UPDATE 1-Colombia central bank increases market liquidity, more measures could follow

(Adds details of meeting)

BOGOTA, March 12 (Reuters) - The board of Colombia’s central bank on Thursday announced measures aimed at providing liquidity to the market amid international turmoil that has caused record devaluations while the Ministry of Finance did not rule out introducing additional measures.

The bank established an auction of Non-Deliverable Forwards worth up to $1 billion to aid trading in U.S. currency.

It also expanded the quota of auctions through which it makes loans to the financial system to 17 trillion pesos ($4.43 billion).

Details of the measures taken can be found on the bank's web page. here

“In principle what we want is to bring additional liquidity to the financial system in both dollars and pesos,” bank chief Juan Jose Echavarria said in a virtual news conference.

However, the bank did not announce dollar purchases to contain the depreciation of the peso, which has fallen 17% since the start of the year.

“Th devaluation (...) is tightly linked to the international oil price and as long as that continues we will allow the devaluation,” Echavarria added.

The Colombian currency hit a record low of 4,065 pesos to $1 on Thursday.

“Assets such as government bonds exceeded all the losses recorded even during the 2008 crisis. Without doubt this will be an historic day in Colombian financial markets,” said Ana Vera, an investment specialist at Corficolombiana.

Finance Minister Alberto Carrasquilla did not rule out taking additional measures in the coming days.

“We’ve experienced this turbulence for four days and I believe nothing can be ruled out (...) options remain open,” he said. “Those decisions will be taken and reported jointly and in coordination between these organizations.”

Reporting by Nelson Bocanegra in Bogota Writing by Oliver Griffin Editing by Matthew Lewis

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