Chile’s peso weakened the most among major South American currencies as the price of copper, the country’s biggest export, fell on concern that demand from China will fade as growth slows.
The peso sank 0.6 percent to 489.29 per U.S. dollar from 486.23 yesterday. Copper for May delivery fell as much as 2.5 percent in New York. The Bloomberg JPMorgan Latin American Currency Index fell 0.5 percent.
Chinese copper demand based on trade data climbed 26 percent in January and February from a year earlier, down from 30 percent growth in December, according to Standard Chartered Plc. China bought a record $4.3 billion of Chilean copper last quarter, more than the U.S. and Japan combined.
“Emerging-market currencies have depreciated in general, but the peso in particular is being hit by copper,” said Gonzalo Castro, a currency trader at Scotiabank Sud Americano in Santiago. “There has been talk in the last couple of days about the Chinese economy weakening and that has direct repercussions on copper.”
Offshore investors in the forwards market had a net short position in pesos of $5.4 billion on March 26, down from $5.7 billion on March 23, according to data published by the central bank. Local investors cut their long position to $17 billion from a nine-month high of $17.2 billion on March 23.
The median forecast of 58 traders and investors in a central bank survey published today was that the peso would reach 485 in seven days and 490 in three months’ time.
Two-year break-even inflation fell six basis points, or 0.06 percentage point, to 3.38 percent as the price of oil declined the most in a week. Chile relies on imports for almost all its oil and gas consumption and a 10 percent increase in oil equates to a 0.48 percent increase in Chilean consumer prices, according to research published yesterday by Standard Chartered Plc.
The Chilean government today sold inflation-linked bonds due in five, seven and 30 years.
Investors placed orders for 166 percent of the five-year bonds, which were sold at a yield of 2.47 percent; 224 percent of the seven years, which were sold at 2.67 percent; and 188 percent of the 30 years, which were sold at 2.98 percent.
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