Chilean Peso Weakens as Intervention Concern Mounts After Rally

Chile’s peso declined as concern mounted that the central bank may intervene to stem gains in the region’s best-performing currency this month.

The peso depreciated 0.3 percent to 471.84 per U.S. dollar at the close in Santiago and was down less than 0.1 percent for the week. The currency earlier today touched 469.45, the strongest level in two weeks. It has rallied 1.6 percent in January, the most among six major Latin American currencies.

Concern that Chile may try to weaken the peso had prevented it from breaking through 470 per dollar since Jan. 8. It reached a three-month high of 469.10 that day before closing weaker as Finance Minister Felipe Larrain said the government was concerned about the exchange rate’s effect on exporters.

“No one wants to sell dollars below 470,” said Alejandro Araya, a trader at Banco Santander Chile in Santiago. The risk of intervention is “not worth it for the extra five pesos.”

Chile’s central bank last intervened in January 2011 after the peso reached 465.13 per U.S. dollar. The monetary authority bought $12 billion in $50 million daily purchases.

The real exchange rate, a measure of Chile’s currency versus trading partners on an inflation-adjusted basis, reached 87.53 in October, the strongest since December 2010. It weakened to 88.2 last month, according to central bank data.

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