The value of Colombian peso is plummeting. It hit – then surpassed – its lowest level in more than a decade this summer, and only the Russian ruble has fallen further over the past year among the 31 major currencies tracked by Bloomberg.

The precipitous drop began last summer when global oil prices began their nosedive. In six months, from June 2014 to January 2015, Brent crude fell from a high of $114 per barrel to just $45, and the Colombian peso has been taken along for the ride, tumbling from 1,850 pesos to the dollar in July 2014 to 2,865 in July 2015.

The plunge may not be over.

Energy companies are laying off employees as they brace for even lower oil prices. China’s stock bubble is bursting. And the Greece debt crisis continues to threaten economic growth in Europe.

Setting a new record

So the near-term question in Colombia has become not whether the peso will regain its previous strength but whether it will surpass the all-time low of $2,980 pesos to the dollar set in January 2003.

“I am reasonably confident that we will test that level,” said Dr. Win Thin, global head of emerging markets strategy for the New York-based bank Brown Brothers Harriman. He added that “there’s no reason to think that the Colombian peso — and many other emerging-market currencies, for that matter — won’t revisit the lows” seen back before commodity prices began to spike in the early 2000s.

In addition to the economic uncertainty across the globe, there 
is another big unknown lurking in Washington, says Alfonso Esparza, senior currency analyst at Canadian-based foreign exchange company Oanda.

One reason the peso continues to fall is that there is a looming interest rate hike on the horizon in the United States, which will prompt even more investors to flee risky emerging markets and seek the safe returns offered by the U.S. dollar.

“The Colombian peso has depreciated close to 10% this month as the U.S. dollar has been boosted by the expectation of a higher benchmark interest rate,” said Esparza. “The American rate hike could come as soon as the September meeting of the Federal Open Market Committee or three months later in December.”

Is the dollar too strong?

When that rate hike happens, will the peso still be below $3,000 to the dollar? Will it be at $3,200. Will it be even worse? Nobody knows, but the days of the peso getting $2,400-to-1 — which were just here in May — aren’t returning anytime soon.

Though the peso problems are on the forefront of everyone’s mind in Bogotá, this is not a uniquely Colombian problem. The greenback simply offers security that nowhere else in the world can right now, so many currencies throughout the world are falling against the dollar.

And since the drop in commodities has hammered virtually every country in Latin America, Colombia’s misery has company.

The United Nations now predicts that the economy of South America, as a region, will contract by 0.4% in 2015, largely as a result of the ongoing turmoil in Brazil, which has now entered recession with a GDP that is projected to decrease by 1.5% this year.

“Today’s economy, like other economies in the region, is facing a temporary, international storm,” said Colombian President Juan Manuel Santos in July while announcing long-term austerity measures designed to get the country’s economic growth back on track.

While Santos is not wrong, issues in other Latin American countries don’t let Colombia off the hook, and few investors are want to bet on the president’s view that the storm is merely a “temporary” act of nature.

Colombia remains more dependent on energy prices than most countries — oil and coal account for nearly 60% of exports — and that is one key reason its currency has taken the largest beating.

The nation’s stock market is not helping either. It was not just the worst-performing in the region — but the world — in the first half of 2015.

The nation’s stock market is not helping either. It was not just the worst-performing in the region — but the world — in the first half of 2015.

Foreign direct investment into Colombia is also slumping, and the peso’s fall has turned inflation into a real concern for all Colombians. Dr. Thin noted that the 4.4% rate in June was above the high end of the government’s target range and that “a weaker peso risks feeding into inflation due to the higher price of imports.”

Finance Minister Mauricio Cárdenas has touted the other side of this equation: a weak peso should increase demand for Colombian exports. The peso’s devaluation is “is something we consider highly desirable,” Cárdenas recently told Bloomberg, going as far as to say “it’s positive” that the dollar is so strong against the peso.

There may be some truth to this in economic theory, but Cárdenas could be playing with fire. “Clearly, he’s welcoming it,” stated Dr. Thin about the finance minister’s currency stance while recognizing that “it does help Colombian exporters at the margin.”

But Thin also cautioned against the danger of someone in Cárdenas’ position inviting currency weakness amid today’s uncertain global economic environment. “Matters can get out of hand quickly and disrupt other markets,” said Thin, “so I think Cárdenas should not be so vocal.”