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Chilean Peso Weakens as Europe Pushes Up Global Risk Aversion

Nov. 14 (Bloomberg) -- Chile’s peso weakened for the third time in four days as demand for higher-yielding assets fell on concern Europe’s economy will worsen after Italy’s borrowing costs soared and data showed European manufacturing output contracted.

The peso fell 0.9 percent to 502.5 per U.S. dollar from 497.97 per dollar on Nov. 11. Breakeven inflation fell as inflation-linked swap yields rose.

The peso slid even as copper, Chile’s biggest export, gained. Stocks and the euro fell after Italy paid 6.29 percent to borrow for five years and industrial production in the euro area fell 2 percent in September from August as the sovereign debt crisis tilted the region toward a recession.

“The European data we saw today is having a depreciative effect on the peso because of rising risk aversion,” said Osvaldo Cruz, an economist at Banco de Credito & Inversiones in Santiago. “We are also seeing declines in bets by foreigners on the peso.”

Offshore investors in the Chilean non-deliverable forwards market had a $5.1 billion short peso position on Nov. 10, an $890 million increase in bets against the currency from a week earlier.

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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