Chile Peso Fluctuates as Copper’s Gain Blunts U.S. Housing Data

Chile’s peso swung between gains and losses as higher prices for copper, the country’s main export, countered concern that the U.S. housing market is struggling to recover.

The peso weakened 0.2 percent to 485.30 per U.S. dollar at 11:58 a.m. in Santiago after paring earlier gains of as much as much as 0.2 percent.

Copper, which accounts for more than half of Chile’s exports, climbed 0.3 percent in New York while U.S. stocks retreated after sales of previously owned U.S. houses unexpectedly fell 0.9 percent in February. Chile’s benchmark equity index was little changed.

“The peso is stable in a tight range of 482 to 487,” said Eugenio Cortes, head of currency forwards at EuroAmerica Corredores de Bolsa SA in Santiago. “It’s moving to the beat of the real demands of banks and the stock market.”

Chilean interest-rate swaps, which reflect traders’ expectations for future rates, fell for a third day after surging to seven-month highs on prospects the central bank will have to raise borrowing costs later this year after January’s surprise cut to 5 percent.

The one-year swap lost seven basis points, or 0.07 percentage point, to 5.23 percent after reaching 5.33 percent on March 16. The two-year slid six basis points to 5.4 percent.

“Today we see a somewhat better international scenario,” Finance Minister Felipe Larrain told reporters in Santiago today when asked why estimates had change to rate increases. “Secondly, there has been an external shock on fuel prices.”

The one-year breakeven inflation rate, a measure of the average future inflation rate priced into the swaps market, dropped six basis points to 3.38 percent. Three-month breakeven tumbled 20 basis points to 3.29 percent.

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