Chilean Peso Fluctuates as Stable Rates Offset Global Concerns

Chile’s peso fluctuated between gains and losses today as expectations the central bank will leave interest rates unchanged offset pessimism about the global economy.

The peso weakened less than 0.1 percent to 480.01 per dollar as of 12:11 p.m. in Santiago after earlier appreciating as much as 0.3 percent to 478.33 per dollar. The currency has traded between 477 per dollar and 484 per dollar since Oct. 23.

Chile’s peso has appreciated 8.2 percent this year, more than any other currency except the Hungarian forint, as the central bank held its benchmark interest rate unchanged since January. The currency is being pushed lower by concern that President Barack Obama won’t reach an accord with Congress to avoid more than $600 billion in mandated spending cuts and tax increases starting Jan. 1 that the Congressional Budget Office has said could drive the U.S. back into recession.

“There are arguments in the domestic economy to support a strong peso,” including stable interest rates, said Cristian Donoso, a trader at Banchile Corredores de Bolsa SA in Santiago. “Yet offshore there’s the U.S fiscal cliff, the sagas of Greece and Spain and weakening copper. Those things play a against each other.”

Chile is the biggest copper producer in the world and the metal, which made up 60.7 percent of the country’s exports last month, reached a 12-week intraday low on Nov. 9.

Copper edged higher today on stronger-than-forecast exports from China, the biggest buyer of the metal. While the pick-up in export growth may be a sign China’s economy is stabilizing, the country’s trade outlook remains grim, according Commerce Minister Chen Deming.

The one-year interest-rate swap rate rose two basis points, or 0.02 percentage point, to 4.99 percent today.

A holiday in the U.S. contributed to the weakening peso as accounts that had bought the Chilean currency in the forwards market in recent days were absent.

“There is real demand for dollars in Chile and the offshore accounts aren’t here,” said Ignacio Ruiz-Moreno, a trader at Scotiabank Chile in Santiago.

To contact the reporter on this story: 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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