(MENAFN- The Rio Times) Colombia's peso and stock market started December with a cautious reversal that says as much about local politics and fiscal worries as it does about global rates.

In foreign exchange, the dollar bounced back to around 3,810 pesos after trading near 3,74x late last week. The move erased part of the peso's strong November rally but still leaves the currency sharply stronger than at the start of 2025.

Dealers point to fading government FX sales and a small rebound in the Dollar Index near 99.3, as markets position ahead of a widely expected Federal Reserve rate cut next week.

At home, the picture is mixed. Inflation has climbed back to about 5.5 percent, well above Banco de la República's 3 percent target, and the central bank has frozen its policy rate at a punishing 9.25 percent.

Research desks such as Accivalores and VanEck warn that Colombia's fiscal slippage and a divided board limit room for aggressive easing. For now, high real yields still support the peso, but more cautious foreign investors are trimming exposure rather than adding to it.



Technical signals back that ambivalence. On the weekly USD/COP chart, the trend still favours a stronger peso, with the pair below its cloud and long-term averages.

The daily chart, however, shows a clear corrective bounce, and the four-hour chart is outright bullish, with MACD turning up and RSI pushing into overbought territory.

In practice, that leaves traders watching a tight band: support around 3,75x and resistance in the 3,83x–3,85x area. Equities remain the bright spot. The COLCAP rose 0.39 percent to about 2,081 points, close to record highs, led by industry, services and agriculture.



Celsia gained just over 3 percent, Corficolombiana 2.8 percent and Grupo Energía Bogotá 2.5 percent, with GEB setting a new all-time high. Year-to-date, Mineros and Fabricato rank among the market's biggest winners, with gains of roughly 70 and 65 percent respectively.

On the losing side, ETB slumped 7 percent to a record low, while Cementos Argos and its preferred share lagged. Over the year, Canacol Energy's local line, ETB and El Cóndor sit near the bottom of the performance tables.

ETF inflows into Colombia and the recent inclusion of more consumer-oriented names in MSCI COLCAP underline that foreign capital still sees opportunity in the country's private-sector champions.

Yet the punishment handed to indebted or state-tied firms is a reminder that markets are voting every day on policy credibility, discipline and respect for capital.

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