By Drew Benson and Andrea Jaramillo Oct. 26 (Bloomberg) -- Colombia’s peso fell to a five-week low after

intervention will be much more effective in weakening the peso than if it were fighting against the current.” The peso plunged 1.6 percent to 1,948.70 per U.S. dollar at 4:19 p.m. New York time, from 1,917.95 on Oct. 23. It touched 1,949.9, its weakest level since Sept. 21. The peso has Dropped 4 percent in the past week, the most among currencies tracked by Bloomberg, on speculation the central bank would act to curb gains. Should the peso weaken beyond 1,950, it will decline to 2,000 as early as this week, Barney predicts. The dollar advanced from a 14-month low against the euro on speculation the dollar’s decline beyond $1.50 will be hard to sustain. The dollar climbed 1 percent to $1.4865 per euro. Inject Cash Colombia’s government on Oct. 15 said it will refrain from selling dollars in the market for the rest of the year after expectations of higher dollar inflows helped push the currency to its strongest since August 2008. President Alvaro Uribe this month urged the central bank to find a “solution” to the gains in the peso, which he said has caused exporters to cut jobs. Policy makers said in their Oct. 23 statement that the purchase of dollars and peso bonds, known as TES, was to inject cash into the financial system. They also left the benchmark lending rate at a record low of 4 percent at the meeting that day. The central bankers didn’t disclose how much of the up to 3 trillion pesos would be spent on buying securities and how much on purchasing dollars. “I’m seeing demand from local pension funds buying dollars today,” said Daniel Arguelles , a senior currency trader at Bogota-based brokerage Corredores Asociados. He expects the peso to slide to 1,990 per dollar in the next few days. Colombian bonds rallied following the central bank’s announcement. bolivar Weakens The yield on Colombia’s 11 percent bonds due in July 2020 fell 17 basis points, or 0.17 percentage point, to 8.42 percent, according to Colombia’s stock exchange. “Even though you don’t know exactly how much the central bank will buy in bonds, whatever amount it does buy will favor the market,” said Camilo Perez , an analyst at Banco de Bogota SA, the country’s second-biggest bank. “That’s what we’re seeing in the yields today.” Venezuela’s bolivar weakened 1.3 percent to 5.3 per dollar in unregulated parallel market trading from 5.23 at the end of last week, traders said. Venezuelans buy dollars in the parallel market when they can’t get government authorization to purchase them at the official exchange rate of 2.15 per dollar. The bolivar fell after terms of a bond sale by state oil company Petroleos de Venezuela SA disappointed local investors, Henrique Tejera , director of Unicapital Casa de Bolsa CA in Caracas said in a telephone interview. The implicit exchange rate resulting from selling the securities abroad was higher than the rate in the parallel currency market, he said. ‘Illogical’ “The fact that the bonds are being issued under local law means that investors abroad are pricing the bonds lower,” Tejera said. “It’s illogical to offer bonds at a higher rate than the parallel rate.” PDVSA, as the oil company is known, sold $3.26 billion of bonds due in 2014, 2015 and 2016 that can be bought in bolivars and sold abroad for dollars, according to a statement today posted on the company’s Web site. In Chile, the peso slid 0.4 percent to 534.45 per dollar, from 532.50 at the end of last week. The yield for a basket of Chile’s 10-year peso bonds in inflation-linked currency units, called unidades de fomento, rose eight basis points to 2.93 percent, according to Bloomberg composite prices. Argentina’s peso weakened 0.1 percent to 3.8235 per dollar from 3.8208 at the end of last week. The yield on the nation’s inflation-linked peso bonds due in 2033 rose two basis points to 11.82 percent, according to Citigroup Inc.’s local unit. Peru’s sol declined 0.7 percent to 2.8890 per dollar, from 2.8690 at the end of last week. The yield on the country’s 8.6 percent sol-denominated bond due August 2017 rose two basis points to 4.84 percent, according to Citigroup. To contact the reporters on this story: Drew Benson in Buenos Aires at abenson9@bloomberg.net ; Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net Last Updated: October 26, 2009 17:44 EDT Colombian Peso Drops to Five-Week Low on Dollar Purchase Plan - Bloomberg.com