The Colombian peso began stumbling hours before the anticipated Wall Street sell-off, which many analysts dubbed a new “Black Monday.” While U.S. stocks pared early losses by the afternoon, the broader sell-off, coupled with another sharp drop in oil prices, triggered renewed volatility across emerging markets – and Colombia was no exception.
The peso dropped more than 4.3% early on Monday, as the U.S. dollar surged to an average of 4,363 pesos, up from 4,179 pesos the previous day. Colombia’s currency was hit hard by falling investor confidence and a continued slide in global crude prices, with the country’s heavy reliance on oil exports magnifying the economic impact.
As U.S. crude futures dropped more than 4% to below $59 a barrel, capping a two-day plunge of 14% to close last week, Brent crude, the international benchmark, also fell more than 4% during the first trading day of the week. At market close, U.S. crude was down $1.29, or 2.08%, at $60.70 per barrel, while Brent slid $1.37, or 2.09%, to settle at $64.21. The losses follow a steep 10% decline for both benchmarks last week, as fears grow that U.S. President Donald Trump’s aggressive tariff policies could trigger a global recession.
“The steep fall in oil is a direct hit to the Colombian peso,” said Juan David Ballén, chief economist at Casa de Bolsa in Bogotá. “Investors are moving away from commodity-linked currencies as risk appetite diminishes in global markets.”
Despite the turbulence, on Tuesday the Colombian peso appeared to be leveling off near the 4,388 mark to the U.S. dollar. Analysts attributed the slight stabilization to signs of recovery in global stock markets, which clawed back some of Monday’s heavy losses. Hopes that the United States could also avoid a full-blown trade war, as several of its trading partners, including key emerging economies are open to negotiate tariff exemptions gave the peso some degree of stability.
“There’s a lot of noise in the market,” said Francisco Chaves, head of market analysis at Banco de Bogotá, in an interview with Bloomberg. “Until there’s clarity – especially from Washington and Beijing – emerging market currencies like the peso will remain vulnerable to sudden shifts.”
While Colombia is not a primary target in Washington’s tariff agenda – receiving only a 10% impact – its exposure to global commodity markets and dependence on foreign capital make it particularly sensitive to macroeconomic shocks. Over the past week, the U.S. dollar has strengthened 5.15% against the peso, which now records a year-to-date gain of 5.23% – evidence of a broader shift in investor sentiment away from emerging markets.
The trade war rhetoric, however, shows no signs of abating. On Tuesday, President Trump threatened to impose an additional 50% tariff on imports from China unless Beijing rolls back its retaliatory tariffs of 34% on American goods. Nearly 70 countries have reportedly reached out to Washington to begin negotiating their own tariff terms.
“The markets are still looking for a signal of stability,” added Chaves. “Until we see easing in trade tensions or policy clarity from major economies, the dollar will continue to gain ground against emerging market currencies, including the Colombian peso.”
For Colombia, the coming days will prove critical as investor uncertainty continues to dictate the peso’s trajectory. If the trajectory maintains its course, the Latin American currency could slide to COP$4500 by the end of the week. Without a contingency plan from the country’s first leftist government to mitigate the full impact of 10% tariffs on key exports, among them coffee, fresh-cut flowers, bananas and avocados, the Colombian peso remains caught in a crosswind – its fate tethered as much to Washington and Beijing as to Bogotá.
