Three key events are poised to influence the dollar's quotation in Peru during the second half of the year. After a cumulative decline of 5.3% year-to-date, these factors could shift the currency's trajectory.

Firstly, the US Federal Reserve's (Fed) decisions on interest rates will play a crucial role. Three monetary policy meetings are scheduled for the remainder of the year: in September (16-17), October (28-29), and December (9-10). Market consensus indicates a high probability of a rate cut in September, potentially followed by another before year-end. This would likely lead to capital outflows from the US into other markets like Peru, putting downward pressure on the dollar.

Secondly, trade tensions between the US and China are a significant factor. With the trade truce extended by 90 days until November 10th, any failure to reach an agreement could lead to higher tariffs, increasing inflation. This scenario might prompt the Fed to alter its plans, reducing or holding back on interest rate cuts. Such a development would likely put upward pressure on the dollar in Peru, especially given China's status as Peru's primary trading partner.

Thirdly, Peru's internal political dynamics, particularly the upcoming presidential elections, will impact the exchange rate. Analysts agree that if an anti-market candidate gains traction in polls, it could cause the exchange rate to jump. However, the landscape of presidential candidates remains unclear. Political uncertainty, when leading to instability, tends to drive the dollar towards more stable economies, though the significant impact of this factor might be felt more towards 2026 unless there's a surprise surge in anti-market candidate popularity by year-end.

Key Indicators

Fed Policy Impact: Interest rate cuts by the US Federal Reserve could weaken the dollar against the Peruvian Sol.
US-China Trade Tensions: Escalation of trade disputes could lead to global inflationary pressures, supporting the dollar.
Peruvian Political Stability: Uncertainty surrounding presidential elections could trigger exchange rate volatility.

Regional Perspective

For Peru, the anticipated volatility in the dollar's exchange rate carries significant implications. A falling dollar could reduce import costs and boost purchasing power, while a rising dollar might increase import expenses and fuel inflationary pressures. The interplay of US monetary policy, global trade tensions, and local political uncertainty presents both a challenge and an opportunity for investors and businesses in Peru.

Analysis

The second half of the year presents a critical period for the dollar's exchange rate in Peru. Analysts point to the US Federal Reserve's interest rate decisions, likely to include cuts, as the primary driver. If the Fed lowers rates, the dollar could weaken, benefiting importers but potentially diminishing the appeal of dollar-denominated assets. However, any escalation in the US-China trade war could counteract these effects, strengthening the dollar due to increased global uncertainty. Domestically, Peru's presidential elections could add to volatility, especially if voters favor candidates perceived as detrimental to the business environment. These factors warrant close monitoring for strategic adjustments.