Chilean Peso Reaches 31-Month High After Interest-Rate Increase

The Chilean peso strengthened the most among Latin American currencies tracked by Bloomberg this week, reaching a 31-month high as copper rose and the central bank lifted its benchmark rate for the seventh straight month.

The peso climbed 0.3 percent to 472.05 per U.S. dollar today, the highest since May 2008, from 473.25 yesterday. That contributed to the 0.9 percent gain this week.

The central bank raised its benchmark rate by a quarter percentage point to 3.25 percent yesterday, the seventh consecutive month it has increased borrowing costs. In a statement released after the close of trading, the bank noted that the peso had appreciated, without adding further comment.

“The central bank is still raising rates and that creates a greater differential between rates in Chile and in the U.S,. so we should see appreciation in the medium term,” said Cristobal Doberti, an economist at Bice Inversiones in Santiago. “There was nothing in the statement about intervention or the currency being misaligned in the short-term.”

The peso’s advance this week beat other Latin America currencies as well as the South African rand, the Australian dollar and the Canadian dollar, according to data compiled by Bloomberg. Since the end of June, the Chilean peso has led gains among 25 emerging-market currencies tracked by Bloomberg.

Copper, Chile’s biggest export, rose today. The price of a pound of the metal for March delivery added 0.7 percent to $4.143 as of 10:58 a.m. on the Comex in New York.

Rate Signal

The central bank’s rate increase “sent an unequivocal signal that rises will continue,” said Aldo Lema, chief economist at Banco Security in Santiago. “The bank isn’t implying a pause in January: rates should keep rising at 25 basis points a month until March.”

Growth in consumer spending, an expanding economy and rising copper prices may continue to push the peso upward, Lema said. He doesn’t expect the central bank to take any measures to weaken the currency. Instead the bank may say in its monetary policy report on Dec. 20 that the real exchange rate is in line with fundamentals, Lema said.

The central bank has increased its benchmark rate from a record low of 0.5 percent in May. Banco Security forecasts that the interest rate may approach 6 percent by the end of next year, Lema said.

Interest-rate swap rates were little changed at 12:20 p.m. New York time.

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