Why is the dollar falling in Peru? Key drivers behind the stronger sol

The USD to PEN exchange rate has dropped to five-year lows in 2025, with the sol appreciating roughly 7% so far. Reports from the Central Bank of Peru (BCRP) and local media show that Peru now leads Latin America in currency strength thanks to a mix of global tailwinds and solid domestic fundamentals.

2025 snapshot: the sol leads LatAm

• The sol has ranked as the region’s strongest currency for two straight years, outperforming the Brazilian real and Mexican peso according to Scotiabank Perú.
• The U.S. dollar index (DXY) has fallen more than 8% in 2025 and remains below 100 points, reflecting broad global weakness (El Comercio).
• While U.S. inflation hovers around 2.9%, Peru closed 2024 near 2%, a differential that historically boosts the sol versus the dollar (RPP).

International forces pushing the USD lower

1. Federal Reserve expectations. Rising unemployment in the U.S. (4.3% per the BLS) and softer macro data have fueled bets on earlier rate cuts. Analysts interviewed by RPP and Perú-Retail note that lower U.S. yields drain the dollar’s appeal and redirect capital toward solid emerging-market currencies such as the sol.
2. Global risk dynamics. Tariff threats, U.S. fiscal noise, and global diversification have investors rotating into gold or the euro instead of dollars (Perú-Retail). Gold prices are up 57% this year, driving record FX inflows for Peru’s mining exports (El Comercio).
3. Portfolio flows. As Bloomberg and Perú-Retail highlight, global funds keep adding Peruvian sol-denominated debt, creating an additional supply of USD in the local market.

Domestic fundamentals supporting the sol

• Trade surplus at records. The rally in copper (+24% YoY) and gold has pushed the trade balance to historic highs. More export dollars entering Peru increase the supply of USD and naturally lower the USD/PEN rate (El Comercio).
• Healthy external accounts. Research from Reevalua points out that Peru keeps current-account gaps manageable while holding strong FX reserves, which removes capital-flight pressure.
• Credible macro policy. The BCRP brought inflation back inside its target and GDP grew ~3% in 2024, reinforcing investor confidence (Perú-Retail). Policy continuity and an independent central bank act as anchors for foreign flows.
• Targeted FX purchases. The BCRP has been buying dollars only to smooth volatility—not to reverse the trend—sending a clear signal that authorities are comfortable with a stronger sol (El Comercio).

Will the trend continue?

Most forecasts place the USD/PEN between S/ 3.40 and S/ 3.50 through 2026, far from the panic highs above S/ 4.00 seen in 2021 (El Comercio) (Perú-Retail). Still, keep an eye on:

• Peru’s 2026 elections. Campaign noise and potential populist turns could lift risk premiums and rekindle USD demand (RPP).
• A hawkish Federal Reserve. If U.S. inflation flares up again, the Fed could pause or reverse the expected cuts, strengthening the dollar worldwide (Reevalua).
• Commodity shocks. A drop in copper or gold prices would sap FX inflows and remove one of the sol’s main supports (Reevalua).

Bottom line: the base case still favors a strong sol, but no investor should assume the slide will last forever. Using alerts and diversified holdings is key.

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