1 Sol – Peru

In 2018, Peru's currency, the sol (PEN), navigated a year of relative stability and modest depreciation against the US dollar, a notable performance amidst regional volatility. The sol ended the year approximately 4% weaker, a manageable decline largely attributed to a stronger US dollar globally and investor caution toward emerging markets. This resilience was underpinned by Peru's strong macroeconomic fundamentals, including low inflation (ending the year around 2.2%), consistent GDP growth, and substantial foreign reserves, which provided a buffer against external shocks.

The primary external pressure stemmed from global factors, particularly the US Federal Reserve's interest rate hikes, which encouraged capital outflows from emerging economies like Peru. Internally, political uncertainty posed a intermittent headwind. The year began with the resignation of President Pedro Pablo Kuczynski in March amid corruption allegations, followed by the succession of Vice President Martín Vizcarra. While Vizcarra's administration initially fostered market confidence with a pro-business stance, his later push for an anti-corruption referendum and clashes with the opposition-led Congress introduced periods of political noise that occasionally weighed on investor sentiment and the currency.

Despite these pressures, the Central Reserve Bank of Peru (BCRP) maintained a proactive and credible monetary policy. It utilized foreign exchange interventions—both dollar purchases to build reserves and occasional sales to smooth volatility—without deviating from its inflation-targeting regime. This careful management, combined with Peru's history of prudent fiscal policy and its status as a major metals exporter benefiting from stable commodity prices, ensured that the currency fluctuations remained orderly. Consequently, 2018 was characterized not by a currency crisis, but by a controlled adjustment of the sol within a framework of overall economic stability.