Chilean Peso Weakens on Speculation Central Bank May Intervene

Chile’s peso fell for the first time in three days, posting a weekly decline, on speculation the central bank may buy dollars to weaken the local currency.

The peso depreciated 0.6 percent to 473.35 per dollar. The currency also posted a 0.6 percent decline since Sept. 14. Chilean markets were closed Sept. 17-19.

“At the end of the day no one wants to go home short dollars,” said Rodrigo Arteche, a trader at Bank of America Merrill Lynch in Santiago.

This year’s 9.8 percent really in the peso makes it the best-performing major currency in Latin America. Twice in the past five years the central bank undertook programs to buy dollars after coming under pressure from politicians and exporters to slow the appreciation of the peso. Speculation that the bank would intervene again increased last month after the real exchange rate, which is adjusted for inflation, reached the strongest level since December 2010.

The currency has rallied 1.6 percent in the two weeks since Chilean central bank President Rodrigo Vergara said it was in line with economic fundamentals and on Sept. 14 reached 467 per dollar, the highest in a year.

Data published today by the central bank show that international investors in the forwards market cut short peso positions by $1.6 billion to $8.6 billion on Sept. 14, before the three-day market holiday.

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