The Colombian peso weakened against the dollar on Monday as banks bought dollars to hedge their forward business.
The peso closed at 1,996 Colombian pesos to the dollar, from COP1,985 on Friday.
Bank customers bought dollars through forward contracts to hedge currency risk, and local regulation forces banks to secure the amount of dollars at the moment the forward sale is agreed upon, German Verdugo, a market analyst with local brokerage Correval, said.
"During the recent weeks' appreciation of the peso, banks sold all the dollars they could so they had few dollars left, and now they have had to buy to be able to carry out forward contracts," Verdugo said.
The peso had appreciated 11% between June 23 and July 23, when it hit COP1,954 to the dollar, its strongest point in almost 10 months.
Verdugo said the appreciation in June-July was so strong that the peso could weaken further in coming days. "Though I'd say the trend is still going toward a strong peso, even if not as strong as during last week," he added.
On the equity market, the benchmark IGBC stock index fell 0.4% to 10,241.50 points, dragged down by shares of state-controlled oil company Ecopetrol SA (ECOPETROL.BO), which fell 1.1% to COP2,745.
The yield on the benchmark 2020 peso-denominated bond rose to 8.99% from 8.781% on Friday.
