BUENOS AIRES, Jan. 29 (UPI) -- Uruguay has raised warning signals in its economic policy after its currency appreciated the most in the world against the dollar this week -- a situation the government views as a risk to export competitiveness and the pace of economic growth.
In recent days, the Uruguayan peso strengthened more than comparable currencies and moved to the top of global foreign exchange performance. As a result, the dollar fell 3.1% in the local market, a deeper decline than those recorded in Brazil, Chile or Colombia.
The scenario set off alarms within the economic team. To counter the dollar's weakness, the Central Bank of Uruguay announced a cut to its benchmark interest rate to 6.5% to discourage financial capital inflows and ease pressure on the local currency.
Along the same lines, the Economy Ministry confirmed forward dollar purchases and coordination with state-owned companies to increase demand for the U.S. currency. Those steps are complemented by measures aimed at reducing domestic costs and supporting economic activity, investment and employment, as concerns begin to mount in the productive sector.
Uruguayan economist Luciano Magnífico, of the Catholic University of Uruguay, said the dollar's behavior in the country cannot be analyzed in isolation.
