Chile Peso Slides as Copper Fall, Oil Gain Weaken Terms of Trade

Chile’s peso weakened for the third time in four days as higher oil prices and lower copper signaled a reduction in the country’s trade surplus.

The peso fell 0.3 percent to 473.55 per U.S. dollar as of 11:50 a.m. New York time. It earlier strengthened as much as 0.3 percent to 470.83 per U.S. dollar.

West Texas Intermediate crude oil for May delivery gained 0.6 percent even as copper futures slid for a fourth day, dipping through $4.3 a pound on concern demand from China, the biggest buyer of the metal, may ebb. The peso has gained 1.2 percent this month as the central bank raised its benchmark interest rate by a half-point for a second straight month.

“Until yesterday, the market was very concerned about the differential in rates because of the systematic rise in Chilean interest rates and had ignored the deteriorating terms of trade,” said Alejandro Araya, a trader at Banco Santander Chile in Santiago. “The market has convinced itself that the dollar should be below 470 pesos, but it’s not possible.”

Copper accounted for 53.5 percent of Chile’s exports in March and oil was 11.5 percent of its imports, according to central bank data. Chile’s central bank has raised its benchmark interest rate more than any other central bank tracked by Bloomberg in the last six months.

Clyde Wardle, a foreign currency strategist at HSBC Holdings Plc in New York changed his forecast for the Chilean currency to 480 at the end of this year from 510.

“We are not turning outright bullish on the Chilean peso, rather, just less bearish,” Wardle wrote today in a note to clients. China’s efforts to switch growth from infrastructure to consumption may cap commodity prices, he wrote, limiting gains in the peso.

Foreign investors reduced bets against the peso in the forwards market to $1.5 billion on April 12, the lowest in a month, according to central bank data that shows Chilean banks’ dollar positions with foreign counterparties.

To contact the reporter 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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