Colombia’s peso fell the most in two weeks following declines in oil, the nation’s biggest export, and as Italy’s credit rating downgrade by Standard & Poor’s hurt demand for higher-yielding assets.

The peso fell 0.2 percent to 1,841.05 per U.S. dollar, from 1,838.35 yesterday. That’s the biggest drop on a closing basis since Dec. 28. Today’s decline pared the peso’s jump this year to 5.3 percent, still the best performance among world currencies tracked by Bloomberg.

“Oil prices affect Colombia directly,” said Francisco Chaves, a fixed-income analyst at brokerage Corredores Asociados in Bogota. “Given the recent gains in the peso, it’s only normal for investors to take profit given the international environment.” Oil accounts for about 40 percent of Colombia’s exports.

Oil dropped to a three-week low after two European Union officials said an embargo on Iranian crude imports may be postponed for six months to allow nations to find other supplies. Iranian Vice President Mohammad Reza Rahimi threatened on Dec. 27 to block the Strait of Hormuz, the transit route for about a fifth of the world’s oil, if the EU bans the country’s oil exports.

Credit Ratings

Italy’s credit rating was cut two levels to BBB+ from A by Standard & Poor’s, a European Union official said today. More downgrades will be announced at 9 p.m. Brussels time (3 p.m. in Bogota) and will include France and Austria while Germany will not be cut, a European official said.

The yield on Colombia’s 10 percent bonds due in July 2024 rose for the first time this week, increasing two basis points, or 0.02 percentage point, to 7.38 percent, according to the stock exchange. The bond’s price fell 0.180 centavo to 120.856 centavos per peso.

A majority of economists in a central bank survey published yesterday forecast policy makers will increase the overnight lending rate by 25 basis points, or 0.25 percentage point, to 5 percent in February after previously predicting the increase would come in March.

Central bankers raised the key rate in November by 25 basis points to 4.75 percent, citing the need to bolster their credibility after “strong” growth drove up inflation expectations, according to minutes of the meeting. They left the rate unchanged at their Dec. 16 meeting and are slated to next meet on Jan. 30.

Economists expect inflation to end this year at 3.5 percent, according to the median estimate, up from 3.4 percent in the December survey and within the central bank’s 2 percent to 4 percent target.