Chilean Peso Gains for Second Day as U.S. Numbers Buoy Copper

Chile’s peso strengthened for a second day, trimming a weekly decline, as copper rose on signs the world’s biggest economy is healthier than expected.

The peso gained 0.2 percent to 517.6 per U.S. dollar from 518.5 yesterday, reducing a drop this week to 1.5 percent. The Bloomberg JPMorgan Latin American Currency Index rose 0.1 percent today.

Copper, which accounts for more than half of Chile’s exports, rose as much as 3.4 percent in New York. U.S. stocks rose after initial jobless claims unexpectedly fell to a tree-year low yesterday and Federal Reserve measures of manufacturing in the New York and Philadelphia regions beat estimates.

“Markets are positive basically because of yesterday’s data and the employment numbers especially,” said Ronald Volpi, head of spot currency trading at EuroAmerica Corredores de Bolsa SA. “Commodities are up, and that means the dollar is down. There is still dollar buying though.”

The peso may trade between 151 and 518 today, Volpi said.

Offshore investors increased their net short position in the Chilean peso in the local forwards market to $5.2 billion on Dec. 14 from $5 billion a day earlier, according to central bank data.

The central bank today bought $50 million for an average of 517.59 pesos per dollar, bringing to an end its intervention in the currency announced in January. The bank paid a total of 5.8 trillion pesos for $12 billion dollars, valued today at 6.2 trillion pesos in the spot market, giving it a notional profit of $805 million. That calculation doesn’t include the cost of funding the intervention through bond sales, nor profits and losses from investing the dollars.

Bond Sales

As the intervention ends, the bank may scale back its bond issuance, reducing supply.

“This is a calendar event and has been known about since the beginning of the year so yields should have priced this in,” said Nathan Pincheira, an economist at Banchile Inversiones in Santiago.

Banchile Inversiones expects $6 billion of government bond sales next year and around $3 billion of central bank bonds, down from $12 billion this year, Pincheira said. That assumes the central bank doesn’t buy more dollars to shore up its international reserves, he said.

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