Chile Peso Leads Latin Currency Declines as Trade Outlook Dims
Chile’s peso fell the most among Latin American currencies as slumping copper prices signaled a lower trade surplus for the metal’s top-producing country.
The peso slid 1.2 percent to 472.50 per U.S. dollar at 10:27 a.m. New York time, from 466.80 on May 20. It was the steepest drop among regional currencies tracked by Bloomberg.
Copper fell the most since November in New York as manufacturing slowed in China, the world’s biggest consumer of the metal. Stocks fell the most in a month, while the euro weakened to a record low versus the Swiss franc, on signs Europe’s sovereign debt crisis is worsening.
“The external scenario seems clearly inclined toward strong upward pressure” on the dollar, analysts at Banco de Credito & Inversiones said today in an e-mailed note to clients. “The central bank president’s speech last week poured some cold water on aggressive takes on normalization that we expect to be interpreted, particularly by foreign investors, as eventual pauses in interest-rate rises.”
Chile probably will slow the pace of rate increases and may keep borrowing costs on hold in future meetings, central bank President Jose De Gregorio said May 20 in comments echoed today by board member Enrique Marshall.
Chile’s real exchange rate is at the lower end of the range that is coherent with its long-term fundamentals, Marshall said in a presentation posted on the bank’s website.
“The peso’s appreciation against the dollar has not been very different from the currencies of other commodity-exporting countries that have intervened in their currency markets,” he said.
The MSCI All-Country World Index sank as much as 1.9 percent in New York as the euro depreciated to less than $1.40 for the first time since March 18. Copper for delivery in July tumbled as much as 4.2 percent on the Comex in New York.
Chile’s central bank paid an average of 472.32 per dollar for $50 million today as part of a $12 billion effort to limit the peso’s gain, according to data posted on the bank’s website.
To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
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