Colombia launches $4B reserve program to cool its red-hot peso

The Colombian peso has had a genuinely remarkable year. Up almost 20% against the US dollar in 2026, it briefly held the title of the world’s strongest major currency. That sounds like good news until you remember that Colombia earns a lot of its foreign income selling coffee, flowers, and bananas to buyers who pay in dollars. On July 31, Banco de la República Governor Leonardo Villar announced a program to accumulate up to $4 billion in international reserves, with the explicit goal of introducing more dollars into the local market and taking some pressure off the peso. The first auction is scheduled for August 3, with options exercisable starting August 4. Why the central bank is buying dollars instead of raising rates Here is the thing that made analysts do a double-take: the monetary policy board held interest rates steady at the same meeting, even though inflation is running above 6%. Most forecasters had penciled in a rate hike. In plain terms, the bank is trying to solve two problems at once. Raising rates would likely attract more foreign capital, putting even more upward pressure on the peso. Buying dollars directly sidesteps that dynamic, injecting supply into the local f...