Chile Peso Gains on Growth Surprises Ahead of Meeting

(Corrects story published yesterday to show growth was stronger than forecast in first paragraph.)

Chile’s peso rallied the most in a month as faster-than-forecast economic growth damped speculation the central bank will cut interest rates tomorrow.

The currency climbed 0.7 percent to 517.57 per U.S. dollar at the close in Santiago, the best performance among major Latin American currencies after the Brazilian real, which gained 2.2 percent.

Chile’s economic growth accelerated to 4.7 percent in the third quarter, faster than the 4.4 percent median forecast of analysts surveyed by Bloomberg. The expansion, driven by rising copper output and what the central bank expected to be the last stages of a retail sales boom, bolsters speculation the central bank will opt to hold off on cutting rates.

“The bank may remain positive after the data surprise,” Alejandro Cuadrado, a currency strategist at Banco Bilbao Vizcaya Argentaria SA, said in a telephone interview from New York. “That has given some relief to the peso.”

The peso has declined 4.6 percent since the central bank unexpectedly lowered the benchmark interest rate to 4.75 percent on Oct. 17, reaching the weakest level since December 2011 last week .

Policy makers will reduce the target lending rate by another quarter-percentage point tomorrow to 4.5 percent, according to the median forecast of economists surveyed by Bloomberg. Eleven predict a cut while eight anticipate no change in rates.

The two-year break-even rate, a projection in the swaps market for annual inflation, was unchanged at 2.48 percent today after falling to a five-month low of 2.42 percent on Nov. 11.

Chile’s ruling alliance failed to capitalize on its economic record in yesterday’s presidential elections, with Evelyn Matthei winning 25 percent of votes against 46.7 percent for the opposition hopeful, former President Michelle Bachelet. The two will face each other in a runoff vote Dec. 15.

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.