Peruvian Sol Falls for First Day in Six as Copper Declines

May.12 (Bloomberg) –Peru’s sol fell for the first day in six following declines in prices of metals including copper, the Andean country’s biggest export.

The sol declined 0.1 percent to 2.7955 per U.S. dollar at 3:39 p.m. New York time, from 2.7915 yesterday.

The Peruvian currency has strengthened 0.9 percent in the past week, the only gain in that period among six Latin American currencies tracked by Bloomberg, after polls showed an increase in support for Congresswoman Keiko Fujimori as she and former army officer Ollanta Humala remained locked in a virtual tie ahead of June 5’s run-off presidential election.

“While we wait for the next polls this weekend the market is taking a breather and temporarily following movements abroad,” said Mario Guerrero, an economist at Scotiabank Peru, the nation’s third-largest lender. “There is also a correction following recent market gains. Margins are too close to identify a clear winner so what we saw was an overreaction.”

Global stocks and commodities prices fell as data showed inflation in China stayed above the government’s target, stoking concern about further monetary tightening that may curb demand. Copper fell to the lowest price in five months.

Fujimori had 41 percent support in a survey published May 8 by Ipsos Apoyo, a Lima-based research company, compared with 38 percent a week earlier. Humala, who topped the field in the first round of elections April 10, had 39 percent in the survey, unchanged from the previous week.

State Control

Humala, leader of Peru’s Nationalist Party and a one-time ally of Venezuelan President Hugo Chavez, has pledged to increase state control of Peru’s gas reserves and revise contracts with foreign investors and trading partners.

Fujimori is the eldest daughter of former President Alberto Fujimori, who is serving a 25-year prison sentence for directing a death squad while president from 1990-2000. She backs policies of current President Alan Garcia that favor increased foreign investment and privatization.

According to a separate poll published May 8 by Datum Internacional, Humala had 40 percent support compared with 41.5 percent in a poll published April 29. Fujimori had 39.1 percent, down from 40.3 percent, according to the survey. Datum interviewed 5,010 people. The poll had a margin of error of plus or minus 1.4 percentage points.

“We recommend increasing exposure to Peruvian assets,” Benito Berber, a strategist at Nomura Holdings Inc., wrote in a report today. “If Keiko wins the election with a wide enough margin to erase doubts about her victory, the market will rally to pre-election levels. If Humala wins, the market will sell off initially but will later recover strongly because he will implement moderate economic policies, at least during the early part of his term.”

The central bank didn’t buy or sell dollars in the currency market today, it said on its website.

The yield on Peru’s benchmark 7.84 percent sol-denominated bond due August 2020 rose 11 basis points, or 0.11 percentage point, to 6.9 percent, according to prices compiled by Bloomberg. The security’s price fell 0.73 centimo to 106.45 centimos per sol.