Chilean Peso Appreciates as Copper, Stocks and Euro Strengthen

Chile’s peso gained for a second day as U.S. stocks rose, a mining strike drove copper prices higher and concern eased that Europe’s debt crisis will worsen.

The peso appreciated 0.2 percent to 484.3 per dollar from 485.45 per dollar yesterday.

Stocks in the U.S. rose as retail sales beat estimates and copper gained as an employee walkout continued at Chile’s Collahuasi, the world’s third-largest mine. The euro rose after European Central Bank President Jean Claude Trichet extended emergency liquidity measures into the first quarter of 2011.

“There’s been a decompression of risks because of Trichet,” said Cesar Perez, an economist at Celfin Capital SA in Santiago. “People are taking opportunities in equities, currencies and commodities.”

Copper for March delivery gained 1.1 percent to $3.991 a pound. It earlier reached $3.996 a pound, the highest since Nov. 12. The Standard & Poor’s 500 Index climbed 0.9 percent to 1217.4 as of 12:29 p.m. New York time.

Chilean nominal and inflation-linked swap rates jumped today as traders reversed bets that the central bank would pause its cycle of interest-rate increases following publication of minutes from the bank’s last meeting yesterday. Swaps in pesos reached the highest levels in more than 22 months.

The two-year peso swap rate increased seven basis points to 4.53 percent, the highest since January 2009. The five-year rate, which reflects traders views of the likely average of future interest rates, rose four basis points to 5.49 percent, also the highest since January 2009.

Swap Rates

The one-year swap rate in pesos climbed six basis points to 4.05 percent, the highest level since Oct. 1. The rate climbed eight basis point yesterday. The two-year inflation-linked swap rate increased five basis points to 1.28 percent, the highest since Oct. 12.

“Some players had been expecting a pause in central bank rate hikes, but the minutes left clear that while they discussed it they decided not to,” said Patricio Aliaga, a trader at Scotia Corredora de Bolsa Chile SA in Santiago. “There have been some operators closing positions.”

Yields on longer-dated peso swap contracts, those that last between four and 10 years, have been rising as offshore investors, who were betting that swap rates would fall, have sought to reduce risk, Aliaga said.

To contact the reporter responsible on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at Papadopoulos@bloomberg.net

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