Chilean Peso Gains as China Reserve Decision Spurs Risk Demand

Chile’s peso rose the most in a week as China reduced bank reserve requirements and European leaders moved to complete a Greek rescue package, spurring demand for riskier emerging-market assets.

The peso strengthened for a third day, advancing 0.5 percent to 482.35 per U.S. dollar at the close in Santiago, from 484.54 on Feb. 17.

“European stocks are up after China’s decision today and that is boosting appetite for emerging-market assets,” Matias Madrid, an economist at Banco Penta, said in phone interview.

China’s central bank decided to cut the proportion of cash that lenders must set aside by half a percentage point beginning Feb. 24, according to a statement published Feb. 18. European officials will try to settle remaining disputes today as they close in on a 130 billion-euro ($171 billion) Greek bailout.

The euro rose as much as 1 percent, European stocks gained as much as 1.2 percent and copper, Chile’s main export, increased as much as 2.7 percent in New York.

One-year inflation swaps in pesos rose by 5 basis points, or 0.05 percentage point, to 4.85 percent. The yield on a basket of 10-year inflation-adjusted bonds rose by 5 basis points to 2.33 percent while one-year break-even inflation increased 10 basis points to 3.22 percent.

Chile’s central bank sees improved optimism in financial markets that may lead policy makers to make “marginal” changes to risk forecasts that were last published in December, newspaper Pulso said, citing bank board member Enrique Marshall.

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