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Chile Peso Falls as Traders Trim Positions on Intervention Risk

Chile’s peso fell as traders concerned the central bank will intervene to weaken the currency trimmed holdings.

The peso dropped 0.2 percent to 473.45 per U.S. dollar at the close in Santiago, trimming its advance this week to 0.3 percent. Copper, Chile’s main export, fell 0.2 percent to $3.7785 a pound on the Comex in New York.

Chile’s stable borrowing costs and expanding economy have helped the peso outperform all other major currencies in the region this year, appreciating 9.7 percent. Central bank President Rodrigo Vergara on Sept. 28 said the bank would seek to weaken the peso if needed. The currency was approaching the level where the bank would consider acting, he said.

“Vergara’s declaration from last week suggested that the risk of intervention is not that low,” said Eugenio Cortes, the head of currency forwards at EuroAmerica Corredores de Bolsa SA in Santiago. “It is better to go into the weekend long or flat dollars and hazard losing a couple of pesos on Monday than to risk losing 15 or 20 pesos from a central bank announcement over the weekend.”

Chile’s economy grew 6.2 percent in the 12 months through August, the central bank reported today, faster than the 6 percent median forecast of analysts surveyed by Bloomberg. Economic growth beat estimates in five of the first eight months of this year.

Minutes from the central bank’s latest meeting this week showed that policy makers didn’t contemplate any change to the key policy rate they have held at 5 percent since January.

“With growth around 6 percent and almost full employment, there’s very little chance that the central bank will lower the rate and that makes taking positions against the peso expensive,” said Eduardo Kutscher, a trader at Celfin Capital SA in Santiago. “Below 470 per dollar, the market is scared about intervention, so it is respecting that level.”

Two-year interest-rate swaps rose four basis points, or 0.04 percentage point, to 4.93 percent, the highest closing level since Sept. 24.

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