Chile’s peso hit a two-week low as copper fell after the U.S. Federal Reserve failed to announce measures to spur growth and on concern the continuing crisis in Europe will sap demand for the metal used in new homes and cars.
The peso fell 0.4 percent to 517.80 per U.S. dollar at 9:53 a.m. in Santiago, from 515.5 yesterday. It reached 517.95 per dollar earlier today, its weakest level this month. The Bloomberg JPMorgan Latin American currency index fell 0.4 percent. The dollar index (DXY), which measures the strength of the greenback against major trading partners, reached the highest since January.
The price of copper, which makes up more than half of Chile’s exports, declined as much as 2.8 percent to the lowest since Nov. 30, eroding the value of the peso. The euro fell below $1.30 for the first time since January as Italian borrowing costs increased at a debt auction and European stocks declined.
“Its copper and Europe,” said Andres de la Cerda, a money markets trader at Bice Inversiones. “The euro broke through an important floor it had because of uncertainty and the lack of a light at the end of the tunnel. The longer it takes before we see some kind of concrete measures the worse things are going to get.”
Federal Reserve policy makers yesterday said the U.S. economy is maintaining its expansion even as the global economy slows, while refraining from taking new actions to lower borrowing costs.
The Chilean central bank yesterday left its benchmark rate unchanged at 5.25 percent, in line with economists’ forecasts. Traders had been pricing in possible quarter-percentage-point cut.
Offshore investors in the Chilean peso forwards market had a $5 billion short position in the currency against the U.S. dollar on Dec. 12.
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