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Chilean Traders’ June Price Drop Call Conflicts With Economists

Traders in Chile’s forwards market are betting economists are wrong in forecasting that consumer prices rose in the Andean nation last month.

Trading in forwards for unidades de fomento, the country’s inflation-linked accounting unit, indicated there was a 0.13 percent price decline in June, while the median forecast of 13 economists in a Bloomberg survey is that prices rose 0.1 percent last month. The National Statistics Institute will publish the data at 8 a.m. tomorrow in Santiago.

“This often happens in the days before the data are announced,” said Felipe Alarcon, an economist at Banco de Credito e Inversiones. “The fundamentals don’t justify such a selloff.”

BCI forecasts that prices fell 0.1 percent last month, matching the projections of Banchile Inversiones and Celfin Capital. The other forecasts in Bloomberg’s survey are that prices were unchanged or rose.

Chile’s peso advanced after the central bank reported that economic activity increased 5.3 percent in May from a year earlier. The median forecast of 14 analysts in a Bloomberg survey was for an increase of 4.5 percent. The currency appreciated 0.3 percent to 495.55 per U.S. dollar.

“Chilean economic activity was surprisingly high,” said Alejandro Araya, a trader at Banco Santander Chile in Santiago. “It’s slightly surprising that the dollar hasn’t fallen further, but the market seems to be on standby.”

International investors in the Chilean peso forwards market had a $9.7 billion bet against the currency on July 3, little changed from June 29, according to data published today by the central bank. Local investors, led by pension funds and excluding banks and brokers, had a $17.5 billion long peso position, the highest since June 5.

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