Dec. 13 (Bloomberg) -- Chile’s peso dropped from an eight-week high as copper fell after Federal Reserve Chairman Ben S. Bernanke expressed concern about the struggle in the U.S. to resolve differences over reducing government deficits.
The peso declined 0.2 percent to 475.10 per dollar at the close in Santiago, from 474.34 yesterday, the strongest level since Oct. 18. Copper for March delivery plunged as much as 1.7 percent to $3.653 a pound in New York.
“There is uncertainty, confusion and concern in the market,” said Cristian Donoso, a currency trader at Banchile Corredores de Bolsa in Santiago. “With copper falling so fast, we should have had more depreciation, but the Chilean peso has reasons to strengthen.”
The Chilean central bank will leave its target lending rate at 5 percent for an 11th straight month today, according to all of the 24 economists in a Bloomberg survey.
Chile has the highest borrowing costs among major rate-setting nations in Latin America behind Brazil, which has cut its benchmark lending rate from 12.5 percent last year to a record low 7.25 percent.
The peso followed copper lower as U.S. House Speaker John Boehner and President Barack Obama struggled to reach a deal to avoid automatic tax increases and spending cuts due to go into effect in January. Bernanke warned yesterday after the central bank announced $45 billion of additional monthly bond buying that the stimulus can’t offset the effect of the so-called fiscal cliff.
Copper is Chile’s biggest export, and the U.S. is the second-biggest consumer of the metal.
International investors’ $6.5 billion bet against the peso in the forwards market on Dec. 11 was the lowest since May 4, according to data published today by the central bank.
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