The markets show signs of "relief" before the departure of Castillo in Peru

The new president of Peru, Dina Boluarte, offers statements at the Government Palace in Lima (Peru) on Thursday.Paolo Aguilar (EFE)

Peru is experiencing a deep political crisis, after a failed self-coup attempt by former president Pedro Castillo.

But for the markets this is, for now, cause for relief.

Given what happened on Wednesday, the national currency depreciated rapidly, so the central bank intervened to lessen the fall.

Two days after Castillo dissolved Congress, only for Parliament to remove him from office and arrest him on a Lima street, markets have calmed down and are even optimistic about the South American country.

The Peruvian sol has recovered and remains one of the strongest currencies so far this year among emerging markets, according to

data .

Dollar-denominated sovereign bonds are trading slightly higher on Friday, an indication that investors view Castillo's exit as positive.

“While investors are likely relieved that the tumultuous Castillo presidency has come to an end and that the new president appears to be less radical, continued political stalemate and instability are likely to lead to further deterioration of the business environment and a weaker investment,” wrote the economist in charge of emerging markets at research firm Capital Economics Kimberley Sperrfechter.

Dina Boularte, who went from being vice president to taking executive power on Wednesday, has not announced whether she will remain in power until the end of Castillo's term, which ends in 2026, or whether early elections will be called.

Boularte expects to announce to her cabinet on Saturday.

She is Peru's sixth president in four years, as the country has been mired in a spiral of corruption scandals and removals at the hands of Congress.

“The political gridlock is here to stay and business confidence and investment are likely to deteriorate and weigh on GDP growth,” Sperrfechter said, warning: “There is a risk that continued political instability consolidate Peru's country risk premium at a higher level, which may force the central bank to maintain tight monetary policy for longer."

Also on Wednesday, in its effort to contain strong inflation, the Central Reserve Bank of Peru increased its reference interest rate by 25 basis points, to 7.5%.

Peru's GDP is estimated to grow between 2 and 2.5% this year.

Political uncertainty could hinder economic growth in 2023, Sperrfechter said.