Nov. 5 (Bloomberg) -- Chile’s peso rose to the strongest level in 14 months as signs of a U.S. economic recovery boosted investors’ appetite for higher-yielding, emerging-market assets.

The peso advanced 0.8 percent to 523.65 per U.S. dollar at 3:30 p.m. New York time, from 528.05 yesterday. It touched 521.91, the strongest level since Sept. 8, 2008. The gain was the biggest today among 26 emerging-market currencies tracked by Bloomberg after the Czech koruna.

The U.S. Labor Department said initial jobless claims dropped to 512,000 in the week ended Oct. 31, the fewest since January and less than the medium forecast of 522,000 in a Bloomberg News survey. In a separate report, the Labor Department said worker productivity, a measure of employee output per hour, surged at a 9.5 percent annual rate, its biggest jump in six years.

“Signals that we’re one further step into the recovery of U.S. consumption are supportive of emerging-market currencies,” said Enrique Alvarez, head of Latin America fixed-income research at IDEAglobal Inc. in New York.

Investor expectations that Chile will continue to bring in dollars from sovereign wealth funds are also helping the peso, Alvarez said. The funds were set up as the government restrained spending and hoarded windfall profit from a three-year copper boom that lasted until the end of September 2008.

Chile’s Wealth Funds

Chile drew $2.6 billion from its sovereign wealth funds in the third quarter to plug a budget deficit that the government forecasts will be about 3.6 percent of gross domestic product this year.

The Economic and Social Stabilization Fund was worth $13.7 billion at the end of September, down from $20.2 billion at the start of the year. The Pension Reserve Fund was worth $3.5 billion on Sept. 30, up from $2.5 billion at the end of 2008.

Chile’s peso has strengthened 6.3 percent in the past month, the best performance among developing-nation currencies.

The yield for a basket of the country’s 10-year peso bonds in inflation-linked currency units, called unidades de fomento, fell six basis points today, or 0.06 percentage point, to 3.07 percent, according to Bloomberg composite prices.

In Colombia, the peso declined 1 percent to 1,982.1 per U.S. dollar, from 1,961.5 yesterday.

The yield on Colombia’s 11 percent bonds due in July 2020 rose three basis points to 8.28 percent, according to Colombia’s stock exchange.

Argentina, Venezuela, Peru

Argentina’s peso was little changed at 3.8157 per dollar from 3.8155 yesterday. The yield on the country’s inflation- linked peso bonds due in 2033 slid 14 basis points to 11.46 percent, according to Citibank Argentina. Argentine markets will be closed tomorrow for a bank holiday.

Venezuela’s bolivar climbed 1.8 percent to 5.53 per dollar in unregulated parallel market trading from 5.63 yesterday, traders said. Venezuelans buy dollars in the parallel market when they can’t get government authorization to purchase them at the official exchange rate of 2.15 per dollar.

Peru’s sol rose 0.2 percent to 2.8955 per dollar, from 2.9007 yesterday. The yield on Peru’s 8.6 percent sol- denominated bond due August 2017 climbed four basis points to 4.98 percent, according to Citigroup Inc.’s local unit.

To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net

Last Updated: November 5, 2009 16:31 EST