Many people are uncertain about the strengthening of the dollar; this growth is not only occurring with respect to the national currency (Colombian pesos), but also globally.

In this article we will talk about why the growth of the dollar occurs, the growth of the dollar in Colombia and the effects that exist with this growth.  

How does the dollar affect Colombia?

In the first instance, the US dollar is currently the reference currency worldwide, representing a large percentage of global reserves. The financial system and stock markets are dollarized and a collapse of the dollar would paralyze global economic activity. 

An example of the importance of the dollar occurs with the trade of Oil and other raw materials, since these transactions are handled in this currency. 

The dollar as a currency to mitigate monetary risk

Post-pandemic, investors have preferred to move away from risk and seek refuge in dollars. The United States Federal Reserve (FED), as a measure to moderate inflation and reduce consumption, increased interest rates, which encouraged people to invest in United States debt bonds. Therefore, more and more investors are interested as it is one of the largest economies in the world.  

These are some currencies that have depreciated more strongly against the dollar:  

• • Sri Lankan rupee. 
• • The Ghanaian cedi.
• • The Laotian kip.
• • The Turkish lira
• • The Ukrainian hryvnia.   

• • The Argentine peso.   
• • New Sudanese dinar.  
• • The Hungarian forint.   
• • The Malawian kwacha.  
• • The lion of Sierra Leone.   

Although the strengthening of the dollar is occurring worldwide, in Colombia the change of Government also generates an effect on foreign investors, presenting an increase or decrease in the level of confidence to make investments in the country. This level of trust is caused by the policies and decisions made by the Government, so in the role of investor all measures are analyzed, finding benefits, threats and investment possibilities. 

Representative Market Rate from Nov.2021 to Oct.2022 – TRM (COP/USD), taken from Banco de la República de Colombia . 

What economists and economic analysts recommend regarding the growth of the dollar in Colombia is that mainly the Government must give confidence to the market with criteria and coherence in its speeches so that investors have confidence and invest in the different sectors, encouraging the productivity of the country, reducing inflation, obtaining economic development and growth.