Feb. 17 (Bloomberg) -- Colombia’s peso plunged to its lowest since July 2006, leading declines in Latin American currencies, as concern international financial institutions will face further losses amid a deepening recession cut into demand for higher- yielding assets.

The peso dropped as much as 2.7 percent amid a decline in oil, Colombia’s biggest export. Demand for emerging-market assets also waned as stocks in Europe and Asia fell and U.S. equity- index futures slumped.

“Markets are dropping worldwide as data shows economies continue to deteriorate,” said Julian Cardenas, an analyst at Bogota-based brokerage Corredores Asociados.

Colombia’s peso slid the most since Oct. 22, weakening 2.5 percent to 2,562 per dollar at 2:54 p.m. New York time, from 2,498.5 on Feb. 13, according to the Colombian foreign-exchange electronic transactions system, known as SET-FX. It earlier touched 2,565.95.

Because of the U.S. holiday yesterday, Colombia’s currency and bonds traded in the so-called next-day market, in which payment and delivery are made the following trading day.

Energy Minister Hernan Martinez’s announcement yesterday that state oil company Ecopetrol SA will buy back a 51 percent stake of its Cartagena refinery from Glencore International AG, is also fueling declines in the currency, according to Cardenas.

“The perception investment is leaving instead of coming into Colombia is leading to expectations the peso will drop further,” he said.

‘Hold Off’

The peso’s decline may lead the central bank to ease the pace of interest-rate cuts, Cardenas said.

“Although the economy needs it, the bank may hold off cutting rates this month as the strong devaluation fuels inflation,” said Cardenas.

Banco de la Republica in January lowered its overnight lending rate by half a percentage point for a second straight month, to 9 percent. Policy makers next meet on Feb. 27.

The yield on Colombia’s 11 percent bonds due in July 2020 rose five basis points, or 0.05 percentage point, to 9.92 percent, according to Colombia’s stock exchange. The bond’s price fell 0.366 centavo to 107.072 centavos per peso.

Crude oil for March delivery fell by as much as 8.2 percent to $34.45 a barrel on the New York Mercantile Exchange. Prices are down 76 percent from a record high in July.

The plunge in oil has also pushed Venezuela’s bolivar lower. The South American nation gets more than 90 percent of its exports from the crude.

‘Fairly Calm’

The bolivar declined 1.8 percent to 5.75 per dollar in the unregulated market from 5.65 yesterday, traders said. Venezuela pegs the bolivar at an official exchange rate of 2.15 per dollar under restrictions imposed in 2003. People turn to the unregulated market when they can’t get dollars at the official rate.

Investors “are fairly calm today” after President Hugo Chavez won a Feb. 15 referendum that eliminates term limits so he can seek re-election in 2012, said Nelson Corrie, a trader at Interacciones Mercado de Capitales in Caracas.

“Chavez will likely dedicate himself now to take measures to address the drop in oil,” Corrie said.

Barclays Capital Inc. said last week that the measures Chavez may take include the implementation of a financial transaction tax, an increase in the value-added tax rate, a devaluation of the official exchange rate and an increase in domestic gasoline prices.

Dollar Purchases

Finance Minister Ali Rodriguez said Feb. 15 that the government doesn’t have any immediate plans to raise taxes or devalue the currency.

In Argentina, the peso fell to its lowest since Dec. 2002, dropping 0.3 percent to 3.5050 per dollar, from 3.4945 yesterday. That’s the currency’s biggest drop this year. A central bank spokesman said the bank sold pesos today. Francisco Diaz Mayer, a currency trader with Buenos Aires-based brokerage ABC Mercado de Cambio, said those peso sales drove the currency weaker toward the end of the day.

The yield on Argentina’s inflation-linked peso bonds due in December 2033 fell 19 basis points to 17.51 percent, according to Bloomberg prices.

Chile’s peso dropped 1.1 percent to 593.27 per dollar, from 587.05 yesterday. The yield for a basket of the nation’s 10-year fixed-rate peso bonds rose three basis points to 4.83 percent, according to Bloomberg composite prices.

Peru’s sol fell for a second day, declining 0.2 percent to 3.2412 per dollar from 3.2336 yesterday. In a bid to stem the currency’s decline, the central bank today bought $102 million worth of soles. The currency has dropped 9.3 percent in the past six months.

The yield on Peru’s 8.6 percent sol-denominated bond due in August 2017 increased four basis points to 7.09 percent, according to the local unit of Citigroup Inc.