Chilean Currency Bears Unwind Bets by $1.1 Billion Over Two Days

International investors reduced their bets against the peso by $1.1 billion in two days to the lowest level in a month on Nov. 19, according to data published today by the central bank.

The peso was little changed at 477.95 per dollar at the close of trading in Santiago. International investors in the Chilean peso forwards market reduced their short position to $8 billion Nov. 19 from $9.1 billion Nov. 15. Chile’s two-year swap rate was 5.08 percent today, compared with 5 percent at the end of last week.

Investors reduced bets against the peso after Chile’s central bank reported Nov. 19 that gross domestic product beat expectations in the third quarter, expanding 5.7 percent from a year earlier. The median forecast of economists in a survey by Bloomberg was for a 5.4 percent increase.

“Offshore investors were long dollars, betting the peso would go to 490, but that didn’t happen and then we got the economic data,” said Eugenio Cortes, the head of currency forwards at EuroAmerica Corredores de Bolsa SA. “So they unwound that bet, which accounts for the flows we saw.” A long is a bet an asset may gain in value.

The peso has rallied 1.4 percent since Nov. 16, the best performance among major Latin America currencies, rebounding from a 16-week low of 484.79 per dollar. The peso has advanced 8.7 percent in 2012, the biggest gain worldwide after the Hungarian forint.

Royal Bank of Scotland Group Plc reiterated yesterday its recommendation that investors buy pesos, saying the economic growth figures add to evidence that the central bank won’t lower its 5 percent target lending rate.

“The local activity data were very positive,” said Felipe Alarcon, an economist at Banco de Credito & Inversiones in Santiago. “It was a major surprise.”

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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