Chilean Peso Posts First Weekly Drop Since June on Policy View

Chile’s peso posted its first weekly decline since June on speculation the central bank will buy dollars to contain the local currency after citing its appreciation.

The peso slid 0.9 percent since this week and was little changed today at 483.27 per U.S. dollar. The currency is still the best performer this year among all of the world’s counterparts tracked by Bloomberg after the Hungarian forint.

Policy makers said in a statement accompanying the decision yesterday to hold the target lending rate steady that the peso had appreciated, making the first mention of the currency’s gain since a dollar-buying program ended in December last year. The monetary authority kept its target lending rate at 5 percent for a seventh consecutive month.

“The peso has been falling since yesterday on speculation of an intervention, which increased after the central bank’s comment,” Cristian Donoso, a trader at Banco de Chile, said in an interview. “The comment wasn’t as strong as I expected, so we can see support for the peso at the level of 485 per dollar.” Support is a level where buy orders may be clustered.

The peso is the world’s fourth-most profitable bet for investors who borrow in dollars to invest in higher-yielding currencies, a practice known as the carry trade.

International investors in the Chilean peso forwards market increased bets against the peso to $8.1 billion on Aug. 14 from $7.8 billion a day earlier. Local investors had a $16 billion bet in favor of the peso.

To contact the reporters on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net; Sebastian Boyd in Santiago at sboyd9@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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