1 Sol – Peru

As of 2025, Peru's currency, the sol (PEN), operates within a context of managed floating exchange rate stability but faces persistent pressures from a combination of political uncertainty and global economic headwinds. The Banco Central de Reserva del Perú (BCRP) has maintained a credible inflation-targeting regime, successfully bringing consumer price inflation back to its target band of 1% to 3% after the global post-pandemic surge. This achievement has bolstered confidence in the sol, which has avoided the extreme volatility seen in some regional peers. However, the currency's value is consistently tested by Peru's heavy reliance on mineral exports (primarily copper), making it sensitive to fluctuations in global commodity prices and Chinese demand.

The primary domestic challenge to currency stability stems from ongoing political fragmentation and social unrest, which deter long-term investment and complicate fiscal policy. While the government has maintained broadly orthodox economic policies, frequent cabinet reshuffles and tensions between the executive and legislative branches have created a climate of unpredictability. This has occasionally led to capital outflows and speculative pressure on the sol, requiring the BCRP to strategically utilize its substantial foreign exchange reserves—one of the largest in the region—to smooth excessive volatility without defending a fixed peg.

Looking forward, the sol's trajectory in 2025 hinges on navigating the dichotomy between sound macroeconomic fundamentals and a difficult political landscape. Key factors include the performance of the mining sector, the BCRP's ability to maintain its operational independence, and the government's success in implementing reforms to boost productivity and diversification. While a sudden currency crisis is considered unlikely due to strong buffers, the sol is expected to remain susceptible to bouts of depreciation driven by risk-off sentiment, both globally and from domestic political shocks, requiring continued vigilant management by the central bank.