EMERGING MARKETS-Colombia peso weakens after cenbank backs off intervention
(Updates prices) By Bruno Federowski SAO PAULO, May 31 (Reuters) - The Colombian peso weakened on Tuesday after the country's central bank announced it would suspend an intervention policy aimed at slowing the currency's decline. The central bank said on Friday it would not hold any additional dollar option sales, but it did not fully rule out further intervention. The bank also increased its benchmark interest rate for a ninth consecutive month on Friday, to 7.25 percent, confirming the expectations of most analysts in a Reuters poll and pushing the peso down 0.75 percent to 3,091 per dollar. The Colombian peso has weakened more than 8 percent so far this month to its lowest since early April. Expectations of higher U.S. interest rates and a decline in the price of oil, a key export and source of tax revenue, weighed on the currency. "This announcement eliminates a source of risk when taking on USD/COP positions and should therefore expedite the COP depreciation path," Nomura Securities strategist Mario Castro wrote in a client note. Colombian markets were closed on Monday due to a local holiday. The Brazilian real also weakened on Tuesday after the release of leaked recordings resulted in a minister quitting interim President Michel Temer's administration, the second such departure since he took over from leftist Dilma Rousseff this month. Investors worry political instability could weaken the government's ability to gain lawmaker support for austerity measures as Latin America's biggest economy battles a deep recession and stubbornly high inflation. Brazil's benchmark Bovespa stock index also fell more than 1 percent. (Reporting by Bruno Federowski; editing by Dan Grebler and Cynthia Osterman)
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