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Chile Peso Drops After IMF Growth Report Overshadows China Boost

Oct. 9 (Bloomberg) -- Chile’s peso fell for a third day and swap rates dropped after the International Monetary Fund lowered its forecast for global growth, offsetting speculation China will boost its finance industry.

The peso weakened 0.1 percent to 474.95 per dollar at the close in Santiago. It earlier appreciated 0.3 percent. The two-year interest-rate swap rate decreased five basis points to 4.90 percent.

The IMF lowered its forecast for global growth this year and next and warned of an “alarmingly high” risk of a steeper slowdown. Copper, Chile’s biggest export, pared its gain. The price of the metal is a key driver of foreign currency flows into the Andean country as the peso often rises or falls in line with expectations for the global economy.

“It was mainly the IMF that cut its global growth forecast for more developed countries and in some emerging market countries it reduced its inflation forecast,” said Mauricio Olivares, a trader at Scotiabank in Santiago. “That was compensated for in the morning by the Chinese liquidity injection, but then the dollar started to absorb the mood of the stock markets.”

Chile’s economy will grow 5 percent this year and consumer prices will rise 3.1 percent, the slowest in the region, the IMF said. It had previously forecast 4.3 percent growth and inflation of 3.8 percent. Two-year Chilean break-even inflation fell two basis points to 2.96 percent.

One-year, three-year, four-year and five-year swap rates decreased five basis points.

Oil Gain

Prices for oil, Chile’s biggest import, rose on increasing tension in the Middle East after Turkey sent tanks to the Syrian border yesterday.

Copper for December delivery was little changed. It earlier climbed as much as 0.9 percent after China’s state-run Central Huijin Investment Ltd. took a stake in Industrial & Commercial Bank of China Ltd. China is the biggest buyer of Chile’s copper, which accounted for half its exports last month.

Chilean banks and brokers had the biggest short-dollar position in the spot market and the biggest long-dollar position in the forwards market since August on Oct. 5, according to data published today by the central bank. A short is a bet an asset may lose value.

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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