Chile’s Peso Gains on Copper Price, Rate-Increase Speculation

Chile’s peso gained the most in almost two weeks as higher copper prices, bets on continued stimulus in the U.S. and speculation local interest rates will increase spurred appetite for the South American currency.

The peso added 1 percent to 481.89 per U.S. dollar at the close in Santiago, the most since April 2. The peso led gains among six major Latin American currencies tracked by Bloomberg.

“Local traders must be weighing the possibility of an interest-rate increase by the central bank after the positive local economic data,” Sergio Tricio, an analyst at ForexChile, said in a phone interview from Santiago. “Copper is also up.”

Copper, Chile’s largest export, rose as much as 2.5 percent in New York on speculation that China, the world’s largest consumer of the metal, may ease monetary policy to stimulate growth. U.S. stocks rose a second day, while the dollar weakened, as signs the Federal Reserve will keep interest rates low boosted the outlook for expansion.

Fed Vice Chairman Janet Yellen endorsed the view that borrowing costs are likely to be maintained through 2014 while Fed Bank of New York President William C. Dudley said it’s “still too soon to conclude that we are out of the woods.”

The euro strengthened as much as 0.8 percent versus the dollar and the Standard & Poor’s 500 rose as much as 1.3 percent.

Chilean traders and investors expect policy makers to raise the benchmark interest rate by a quarter-point to 5.25 percent within six months, after forecasting no change two weeks ago, according to a central bank poll released yesterday.

Chile’s central bank last week increased its 2012 inflation forecast to 3.5 percent from 2.7 percent after economic growth exceeded estimates in December and January.

“Two days ago traders thought it was the end of the world, and today everything rose,” Raul Lopez, head currency trader at Banco Penta, said in a phone interview. “If we have another positive day tomorrow, with optimism from China and copper prices rising, I have no doubt that the peso may try to break the 480 per dollar resistance level.”

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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