Chilean Peso Declines Most in Emerging Markets as Copper Plunges

Chile’s peso fell the most in emerging markets after copper plunged as surging interest rates in China, the nation’s biggest trading partner, eroded the outlook for the metal’s demand.

The currency depreciated 1.1 percent to 505.22 per dollar at the close in Santiago, the weakest since Sept. 13. Copper fell 2.1 percent, the most since July.

The peso has fallen 2.2 percent since the central bank unexpectedly cut its benchmark interest rate by a quarter-point to 4.75 percent Oct. 17. Copper, which accounts for more than half of Chile’s exports, tumbled today after China’s benchmark money-market rate soared and its biggest banks tripled loan write-offs. China is the main buyer of Chile’s copper.

“We’re facing a structural change after the central bank cut rates,” said Alejandro Araya, a currency trader at Banco Santander Chile (BSAN) in Santiago. “And people reacted badly to the renewed financial tension in China.”

The peso approached the 505.83 per dollar upper limit of its 20-day Bollinger band, a signal to some investors that the currency’s drop will be hard to sustain.

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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