Chile Peso Strengthens as Fed Stimulus Speculation Lifts Copper

Chile’s peso gained as speculation that the U.S. Federal Reserve will extend its bond-buying program to boost the world’s largest economy through 2014 lifted the price of copper, the Andean country’s biggest export.

The peso gained 0.2 percent to 471.16 per U.S. dollar at 10:23 a.m. Santiago time as copper headed for a three-month high in New York. Chile’s currency has strengthened 1.7 percent this month, the best performance among the six most-traded peers in Latin America after Brazil’s real.

The Fed’s latest round of bond buying won’t end until next year’s first quarter, according to median estimate of economists surveyed by Bloomberg. The peso’s appreciation is being limited by concern the central bank may take steps to slow its rise should it pass 470 per dollar, said Cristian Donoso, a trader at Banchile Corredores de Bolsa SA in Santiago.

“What stops the appreciation is the ghost of the central bank below 470 per dollar,” Donoso said in a phone interview. “At that level there’s a lot more interest in buying dollars again.”

Chile’s peso was headed for its strongest close against the yen since September 2008. The euro, used by traders as an indicator of the weakness of the dollar, appreciated past $1.35 for the first time since 2011 and reached a seven-month high of 639.64 pesos. Economic confidence in the euro area rose more than economists forecast in January, adding to signs that the 17-nation currency bloc may be emerging from a slump.

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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