March 19 (Bloomberg) -- Chile's peso fell the most in almost two months as the price of copper, the country's biggest export, dropped amid a rout in commodity markets.

Demand for pesos also weakened after Chilean central bank President Jose De Gregorio said yesterday the currency may be ``overvalued,'' leading some lawmakers to call on the bank to buy dollars to stem the peso's five-year, 68 percent advance.

Chile's peso slipped 1.6 percent to 438.77 per dollar at 4:54 p.m. in New York from 431.85 yesterday. Copper futures for May delivery dropped 3 percent to $3.6335 per pound in trading on the New York Mercantile Exchange. The base metal has advanced 19.1 percent this year.

``A U.S. recession would hurt Chile's commodity exports,'' said Juan Pablo Castro, an analyst at Santander Investment Research Inc. in Santiago.

The yield on Chile's 6 percent bonds due in March 2017 rose 2 basis points, or 0.02 percentage point, to 6.65 percent, according to Chile's Commerce Exchange. The price fell 0.1 centavo to 96.66 centavos per peso.

Colombia's peso dropped 0.4 percent to 1,821.85 per dollar from 1,815 yesterday, according to the Colombian foreign- exchange electronic transactions system, known as SET-FX. It earlier strengthened to 1,801.75, the highest since July 1999.

``The drop in commodity prices today is leading to some risk aversion,'' said Francisco Chaves, an analyst at Bogota- based brokerage Corredores Asociados. ``Still, the peso will probably continue its strengthening trend in the coming weeks helped by the rate differential.''

`Strong Inflows'

The Federal Reserve lowered the benchmark U.S. lending rate three-quarters of a percentage point to 2.25 percent yesterday as part of an effort to shore up growth in the world's biggest economy. The move increased the gap between benchmark U.S. and Colombian rates to 7.5 percentage points, the widest since July 2001.

Julian Ramirez, head analyst at Bogota-based brokerage Proyectar Valores SA, forecasts the Colombian currency will gain to as strong as 1,756 per dollar within the next two weeks.

``We've seen strong inflows from foreign direct investment this year, but it's the spread that will likely accelerate dollar inflows in the short term,'' Ramirez said.

The yield on Colombia's benchmark 11 percent bonds due July 2020 rose 7 basis points to 11.65 percent, according to Colombia's stock exchange.

Peru's sol rose 0.3 percent to 2.7935 per dollar from 2.803 yesterday. It touched 2.7897, the strongest since February 1998. The central bank bought $132 million in the foreign exchange market today, adding to the $126 million it bought yesterday to stem gains in the sol.

Peru, Argentina, Venezuela

The yield on Peru's 8.6 percent sol-denominated bonds due in August 2017 fell 1 basis point to 6.45 percent, according to Interbank SA. Peru will resume its monthly local bond auctions on March 26, when it will offer to sell 300 million soles of 8.2 percent bonds due in 2026, Jose Miguel Ugarte, the Finance Ministry's debt director, said in an interview today.

Argentina's peso dropped 0.3 percent to 3.156 per dollar from 3.1465 yesterday. The yield on the nation's 5.83 percent inflation-linked peso bonds due in December 2033 rose 12 basis points to 9.07 percent, according to Citigroup Inc.'s unit in Argentina.

Venezuelan markets are closed today for the Easter holiday.

To contact the reporter on this story: Andrea Jaramillo in Bogota at

Last Updated: March 19, 2008 16:59 EDT