Chile’s Peso Rises for Fourth Day on Eased European Debt Concern

Chile’s peso rallied for a fourth day as speculation European officials will contain sovereign- debt turmoil spurred demand for emerging-market assets.

The peso appreciated 0.3 percent to 482.60 per dollar at the close in Santiago, the strongest level since May 7. The peso has increased 3.8 percent this month, the best performance among major Latin American currencies.

“The market is waiting for the announcements from the European Central Bank,” Alejandro Araya, a trader at Banco Santander SA (SAN), said in a phone interview from Santiago. “In the meantime, the peso should trade laterally within a 479 to 484 per dollar band.”

European Central Bank President Mario Draghi sparked a global market rally last week by pledging to do whatever it takes to preserve the euro. Draghi is trying to build consensus among governments and central bankers for a plan to ease borrowing costs in Spain and Italy before the ECB’s policy decision Aug. 2.

The peso remained higher even as the National Statistics Institute reported that Chile’s manufacturing index rose 1.1 percent in June, less than the median forecast of 3.2 percent growth among economists surveyed by Bloomberg.

Chile’s central bank said today that its board was unanimous in its decision to keep borrowing costs unchanged this month, indicating monetary easing will occur only when the domestic economy shows more signs of weakness.

The central bank has kept the target lending rate unchanged at 5 percent for six straight months following a surprise reduction of a quarter-percentage point in January.

Two-year interest-rate swaps increased 12 basis points, or 0.12 percentage point, to 4.66 percent, while one-year swaps rose 11 basis points to 4.84 percent.

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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