Chilean Peso Gains Most in Month as Jobs Data Drags Down Dollar

Chile’s peso rose the most in four weeks against the dollar after the U.S. economy added fewer jobs than estimated in November, supporting the Federal Reserve’s plan to buy bonds.

The peso gained 0.9 percent to 480.15 per U.S. dollar from 484.30 yesterday, the biggest single-day gain since Nov. 4. The peso appreciated 0.6 percent this week.

Latin American currencies including the peso gained after the U.S. Labor Department published figures showing the world’s largest economy added fewer jobs than forecast. The dollar weakened on the report, which supports the Fed’s plan to pump money into the financial system, debasing the currency.

“It seems like the peso has finally taken off; it had been lagging,” said Flavia Cattan-Naslausky, a currency strategist at RBS Securities Inc. in Stamford, Connecticut. “We may see more of a catch-up next week. Non-farm payrolls were definitely a disappointment, but the numbers were in line with quantitative easing. The market doesn’t want the recovery to come too quickly.”

The peso gained earlier in the day on speculation the European Central Bank’s purchases of bonds would help shore up the European economy and bolster demand for Chilean exports.

The peso is more vulnerable to events in Europe than other Latin American currencies because of Chile’s greater reliance on exports, Moises Junca, chief regional currency strategist at Banco Bilbao Vizcaya Argentaria in Mexico City, said yesterday. Chile sold 19 percent of its exports to countries in the European Union last quarter, according to central bank data.

Colombia Bet

BNP Paribas SA, the world’s biggest bank by assets, recommended investors bet Colombia’s peso will outperform Chile’s currency on prospects of improving terms of trade and higher borrowing costs in Colombia. Chile’s peso rose to 3.9891 Colombian pesos on Nov. 30, the highest since Jan. 18.

The Chilean peso may be vulnerable next year as China, the biggest consumer of Chile’s main export copper, tightens monetary policy to rein in inflation. At the same time, the Colombia is expanding its trade links and reducing dependence on Venezuela, Diego Donadio, a BNP Paribas strategist in Sao Paulo, wrote today in a note to clients.

“Moreover, Colombia is expected to embark in monetary tightening in the first half of 2011, while Chilean officials are suggesting they could take some ‘transitory pauses’ in the monetary cycle,” Donadio wrote.

The extra yield, or spread, investors demand to hold Chile’s 10-year bonds in dollars instead of U.S. Treasuries fell to 61 basis points today, the lowest since Nov. 15, from 86 basis points on Nov. 26.

The spread on Chile’s credit-default swaps tightened to 80 basis points today from 90 a week ago, according to CMA Datavision in London.

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