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The dollar experienced a broad decline against major currencies, falling 9.5% since January, a trend unexpectedly reinforced by U.S. trade restrictions. This weakening of the dollar coincided with concerns surrounding institutional and fiscal stability within the United States following policy announcements from U.S. authorities.
Historically, a flight to safety would typically benefit the dollar during periods of risk aversion. However, eroding confidence in the U.S. currency, fueled by fears that government policies could damage the U.S. economy and public finances, has accelerated the dollar’s decline.
Three interest rate cuts by the Federal Reserve this year, bringing the rate to 3.75%, along with expectations for two more cuts in 2026, played a significant role in this downturn.
Economic policies under the current U.S. administration are raising concerns about a potential slowdown in U.S. economic activity, contributing to the dollar’s weakness. (Photo by ANDREW CABALLERO-REYNOLDS / AFP)
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Dollar Suffers Historic Decline Against the Sol
In Peru, the dollar depreciated 10.6% against the Sol in 2025, falling from S/ 3.761 to S/ 3.363. This marks the largest annual decline since the introduction of the Nuevo Sol in 1991, following economic reforms.
Globally, the weaker dollar and the search for alternative currencies have boosted demand for metals, with record highs for copper, gold, and silver driving significant dollar inflows through Peruvian exports. This resulted in a trade surplus of nearly USD $33 billion this year.
Peru’s substantial trade surplus, nearing USD $33 billion, has contributed to the dollar’s decline.
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Is the Dollar Losing its Safe-Haven Status?
This influx of capital has significantly impacted the currency market, driving the unprecedented decline of the dollar. However, inflows from illegal mining activities have also contributed to the trend, according to Félix Olivares, Executive Director-Sales & Trading Head at BTG Pactual, and Diego Marrero, Portfolio Manager at Blum (Gestión 20.11.2025).
“First and foremost, the global weakness of the dollar is the relevant variable,” Olivares summarized. “This is compounded by high commodity prices for the country’s exports, and inflows from illegal mining.”
The broader decline in the dollar is linked to the policies of the current U.S. administration, which are creating significant volatility and uncertainty, as well as the Fed’s interest rate cuts, he explained.
While the dollar hasn’t entirely lost its safe-haven appeal, some investors in Asia, Europe, and Latin America who hold U.S. assets, such as stocks or bonds, are now hedging against currency risk—due to the dollar’s decline—by purchasing derivatives.
“This shift is occurring in investment policies, which, as these hedges are taken out, leads to the strengthening of other currencies against the dollar,” Olivares noted.
Félix Olivares of BTG Pactual Peru highlights an additional factor contributing to the dollar’s decline.
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When Will the Dollar Fall Below S/ 3.30?
Analysts predict the dollar will continue to weaken against the Sol in 2026. In the first quarter, before the elections, the currency is expected to accelerate its decline to below S/ 3.30 due to increased dollar supply related to corporate tax payments.
Following the elections, a benign outcome or at least finalists considered “non-destructive” would likely continue the downward trend, analysts estimate.
Even in a negative scenario where a candidate unfavorable to the market wins, the dollar would approach S/ 3.50, but then return to a downward trajectory, ultimately rising but not exceeding S/ 4, “because we know how the BCR will react,” according to an executive at BTP Actual.
Jorge Ramos, Director of Market and Investor Relations at Fibra Prime, agrees that the coming year should be favorable for the Sol, as variables that weaken the dollar converge, such as the shift in the energy matrix, which requires copper. “We are still talking about a commodity cycle, but there is a structural change that is the transition of the matrix; and there is also an appreciation of precious metals,” he stated.
This translates to more dollar inflows into the country, further appreciating the national currency to the extent that the BCR has intervened several times to moderate the trend. “From a macroeconomic point of view, the fundamentals are very solid for the Sol, and there is a global decline in the dollar due to the cycle of Fed rate cuts, which will lead to capital flows to currencies with higher returns. But politically, there could be headwinds for the Sol, although something very extreme would have to emerge (a candidate with possibilities) to significantly change the dollar’s trend,” Ramos affirmed.
However, before the electoral process, the dollar is expected to continue to lose ground against the Sol.
