The dollar recovers against the Peruvian sol amid political and economic uncertainty.

At the beginning of July, the exchange rate of the dollar against the Peruvian sol experienced a notable decline, settling at S/ 3.84. This phenomenon was attributed to a combination of factors, among which the slight recovery in the prices of copper and gold—two of Peru's main export products—stood out. The appreciation of the sol was also driven by the decision of the Central Reserve Bank of Peru (BCR) to pause interest rate cuts, which remained at 5.75%. This allowed the Peruvian currency to temporarily strengthen against the U.S. dollar, which had an exchange rate of S/ 3.71. However, many analysts considered this drop in the exchange rate to be more of a temporary correction than a new long-term trend. Since mid-July, the dollar began to regain ground, rising to S/ 3.78. This rebound can largely be attributed to the publication of positive economic data in the United States, where Gross Domestic Product (GDP) grew by 2.80%, surpassing market expectations. These indicators suggest that the U.S. economy is in a phase of robust economic activity, increasing the likelihood that the Federal Reserve will maintain high interest rates for an extended period. As the dollar strengthened, political uncertainty in the United States also began to play a crucial role in the dynamics of the foreign exchange market. Attention focused on the attack against Republican candidate Donald Trump and a competitive electoral environment that includes Kamala Harris as a potential successor to Joe Biden. In times of political instability, investors tend to seek refuge in safe assets like the dollar, boosting its demand and, consequently, its appreciation against the Peruvian sol. The volatility in the markets resulting from these events contributed to the perception of the dollar as a "safe haven asset." Looking ahead, it is anticipated that the exchange rate could reach levels between S/. 3.90 and S/. 4.00 by the end of 2024 or early 2025. This projection is based on the possibility that the Federal Reserve may reduce its interest rates starting in September, which could create a new scenario where the BCRP would be compelled to adjust its own rates in response. A more aggressive cut by the Peruvian bank could widen the interest rate differential, favoring the dollar. Technical analysis of the current situation reinforces these projections. In the weekly charts, a resistance level around S/. 3.82 is identified, which has been tested multiple times without being decisively surpassed. This level becomes an important indicator for market operators, as breaking through it could open the door to a new rise in the exchange rate. On the other hand, there is significant support near S/. 3.70, which has kept the price of the dollar relatively stable at different moments. In the context of a long-term analysis, the monthly chart reveals a resistance around S/. 3.89, the highest figure reached in the past year. This range of resistance and support suggests that the exchange rate could consolidate between S/. 3.70 and S/. 3.82 in the short term, reflecting a market awaiting new signals to define its direction. Moreover, economic and political stability in the United States, despite the impending electoral volatility, will be a determining factor in the strength of the dollar. Investors will remain attentive to upcoming political and economic events that may influence the Federal Reserve's decisions, as well as the perception of risk in the markets. In conclusion, the future exchange rate between the dollar and the Peruvian sol appears uncertain, but trends indicate a possible recovery of the dollar in the coming months. Movements in interest rates, along with the political landscape in the United States and economic stability in Peru, will be key factors to watch in the development of this narrative. Meanwhile, consumers and businesses should prepare for a foreign exchange environment that could be more volatile in the near future.