Chile’s peso plunged after copper fell on data that showed China, the world’s biggest buyer of the metal, imported fewer goods than forecast last month.
The peso slid 0.8 percent, the most in a month, to 489.05 per U.S. dollar. The Bloomberg JPMorgan Latin American Currency Index declined 0.7 percent to a three-month low.
Chinese imports rose 5.3 percent last month, less than the 9 percent median estimate among analysts surveyed by Bloomberg. China imported $4.3 billion of Chilean copper in the last quarter of last year, more than twice as much as the U.S. and Japan combined. Prices for the metal fell as much as 2 percent in New York, barreling lower after it sank below $3.70 a pound for the first time since January.
“That triggered stop losses,” said Ronald Volpi, head of spot currency trading at EuroAmerican Corredores de Bolsa SA. “And it’s likely that copper closes below $3.70 and confirms the breach.”
Copper makes up half of Chile’s exports.
Foreign investors in the peso forwards market trimmed their short peso position to $6.5 billion on April 5 from a two-year high of $7 billion on April 4, according to central bank data published today. Local investors had a $16.3 billion long peso position, down from a nine-month high of $17.5 billion on March 30, a sign that Chile’s private pension fund managers have reduced hedges of their foreign currency holdings.
The two-year swap rate fell nine basis points, or 0.09 percentage point, to a two-week low of 5.35 percent. The five-year rate fell nine basis points to 5.66 percent.
The two-year rate has fallen 23 basis points since April 4, the day before the National Statistics Institute announced inflation slowed in March to 3.8 percent. Monthly inflation was 0.2 percent, less than the 0.5 percent median forecast in a Bloomberg survey.
“Swap spreads are contracting a lot, in line with what is happening overseas and helped by the 0.2 percent CPI number, which the market wasn’t expecting,” said Felipe Alarcon, an economist at Banco de Credito e Inversiones in Santiago.
The U.S. five-year swap rate fell four basis points to a one-month low today.