US Dollar Drops in May: Will It Reach 4 Soles After Elections?

The Peruvian sol (PEN) experienced a decline in May 2026, marking the first drop after two consecutive months of stability, as markets closely monitor the country’s upcoming presidential runoff election. Analysts and investors are debating whether the currency will approach a critical threshold of 4.00 sol per U.S. Dollar (USD) in the wake of the June 7 runoff between Keiko Fujimori and Roberto Sánchez. The outcome of the election, which has intensified political and economic uncertainty, is expected to influence exchange rate dynamics and investor sentiment.

The sol’s recent volatility reflects broader concerns about Peru’s economic trajectory amid a highly polarized electoral race. Fujimori, the daughter of former president Alberto Fujimori, and Sánchez, a former education minister, are vying for the presidency in a contest that has been shaped by allegations of corruption, economic reforms, and the role of foreign investment in sectors like mining. The election has already drawn attention from international markets, particularly given Peru’s reliance on copper exports and its ties to China.

According to recent polling data cited by local media, Fujimori holds a narrow lead over Sánchez, with some surveys suggesting a 52% to 48% split among decided voters. However, the race remains tightly contested, and the outcome could have significant implications for the sol’s value. Market analysts note that a Fujimori victory might attract foreign capital due to her pro-business stance, while a Sánchez win could lead to short-term uncertainty, potentially weakening the currency and increasing borrowing costs for the government.

The Central Reserve Bank of Peru (BCRP), the nation’s central bank, has maintained a cautious approach to monetary policy, balancing inflation control with the need to support economic growth. Recent data indicates that Peru’s economy expanded by 3.2% in the final quarter of 2025, driven by mining activity and infrastructure projects. However, the BCRP has warned that political instability and external shocks—such as fluctuations in global commodity prices—could disrupt this momentum.

Investors are also watching the performance of Peru’s sovereign debt, with credit-default swaps (CDS) reflecting heightened risk premiums in recent weeks. A Sánchez victory, which would see him face charges of corruption, could trigger a temporary sell-off in the sol, as markets reassess the country’s fiscal and regulatory environment. Conversely, a Fujimori win might bolster confidence in her administration’s plans to attract foreign investment and streamline regulations for the mining sector.

The runoff election has also reignited debates about Peru