Colombia’s Peso Rally Is Driven by Strong Inflows, Election-Driven Confidence and Rate Differentials

In 2026, the Colombian peso has seen a sharp appreciation, gaining almost 23% against the U.S. dollar. This move has reversed much of the previous depreciation that saw the exchange rate reach nearly 5,000 pesos per dollar in late 2022. As of mid-September, the peso traded around 3,100 pesos per dollar. Over the past year, the peso has increased by roughly 38% since the end of 2022.

The Bank of the Republic, Colombia's central bank, attributes this appreciation to several factors, including lower domestic risk aversion, higher oil prices, and an attractive interest-rate differential. Foreign investors have also increased their holdings of Colombian government bonds, further supporting the peso.

The presidential election held on June 21 played a significant role in bolstering investor confidence. After Abelardo de la Espriella won the runoff, there was a continued response to expectations about the incoming government's economic policies and fiscal management. The central bank noted a decline in sovereign risk perception post-election, which led to increased exposure to Colombian public debt by foreign investors.

Foreign currency inflows, particularly remittances and foreign investments, have been instrumental in strengthening the peso. Remittances from Colombians living abroad reached a record high of US$3.347 billion in the first quarter of 2026. These transfers provide households and the broader economy with a steady source of dollars.

Additionally, international investors have shown increased interest in Colombian government bonds, driven by lower sovereign risk aversion and expectations of fiscal consolidation. The central bank raised its benchmark rate by 75 basis points to 12% in June 2026 and maintained it in July, reinforcing demand for the peso through higher returns on peso-denominated assets.