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Chile Peso Rises to Three-Month High as Short Positions Lowered

Chile’s peso, the best-performing emerging-market currency this year, rallied to a three-month high as international investors in the forwards market cut net bets against the currency amid signs of economic strength.

The peso appreciated 0.2 percent to 471.08 per U.S. dollar at 11:15 a.m. in Santiago, the strongest level on a closing basis since Sept. 26. Foreign investors cut their net short peso position to $3.3 billion on Jan. 7, the lowest level in 15 months, from $6.7 billion a month earlier, according to central bank data published today.

The currency rallied after a Jan. 7 report showed the economy grew 5.5 percent in November from a year earlier, beating economists’ expectations for a fourth straight month.

More offshore investors are betting on the appreciation of the peso, and “there’s still a bit of swing left before the central bank intervenes,” said Mauricio Olivares, a currency trader at the Chilean unit of Bank of Nova Scotia in Santiago.

The peso dropped from a three-month intraday high after Finance Minister Felipe Larrain said the government was concerned about the currency.

The central bank gathers information on the market positions of banks and five brokers and publishes them daily, on a two-day lag.

A short position is a bet that the currency will fall. A net short position is when the amount of bets against the currency is greater than the amount wagered on an increase.

Foreign investors typically have a net short position because the figure includes hedging by mining companies and others of their long-term investments in Chile.

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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