Chile Peso Drops Second Day as Copper Slump Dims Export Outlook
Chile’s peso fell for a second day, heading for the biggest two-day decline among major Latin American currencies, as the price of its main export, copper, dropped.
The peso slid 0.3 percent to 494.40 per U.S. dollar as of 10:08 a.m. in Santiago from 492.75 yesterday. The median forecast of 60 traders and investors in a central bank survey was that the peso would reach 490 in seven days.
Copper dropped after the International Monetary Fund warned that fallout from the European debt crisis could derail global growth and data from the U.K. showed Europe’s third-largest economy on the brink of recession. The peso is retreating after it broke through a previous high to reach the strongest in four months, peaking at 486.43 per dollar on Jan. 23.
“This is a correction within an appreciative trend,” said Eugenio Cortes, head of currency forwards at EuroAmerica Corredores de Bolsa SA in Santiago. “We could get to 497.5 or 498 per dollar, but it should hold at that level. When we got through 486 we were out of line with other emerging currencies, so it has rebounded back.”
Were the peso to fall through 498 it could trigger a change in trend and a retreat beyond 500 per dollar, Cortes said.
Investors had been using the Chilean peso to bet on global growth, Alvaro Vivanco, a strategist at Banco Bilbao Vizcaya Argentaria SA in New York, said yesterday. Offshore investors in the Chilean peso forwards market reduced their short position in the currency to $4.7 billion, the lowest in seven weeks, on Jan. 23 as the peso reached a four-month high, central bank data show.
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