Chile’s peso dropped from its highest level since October after the U.S. Federal Reserve said yesterday it will probably stop buying bonds this year, boosting the prospects for the dollar.
The peso weakened as Fed officials said in minutes of their December policy meeting released yesterday that they will probably end sometime this year the $85 billion monthly bond-purchase program to support the world’s largest economy. The comments boosted the dollar and undercut commodities including copper, Chile’s biggest export.
“That the Federal Reserve is considering withdrawing the stimulus changes market expectations,” said Patricio Aliaga, a trader at the Santiago unit of Bank of Nova Scotia. “With this kind of noise going on, the dollar could appreciate against its traditional benchmarks and recover its lost ground.”
The currency slid 0.1 percent to 473.25 per U.S. dollar at the close in Santiago. It finished yesterday at 472.60 per dollar, the strongest level since Oct. 17. The peso has strengthened 1.3 percent in the first days of 2013, the best performance among 25 emerging-market currencies. Futures on copper dropped 0.6 percent today.
International investors in the Chilean peso forwards market cut their net short position to a 13-month low of $4 billion on Jan. 2, according to data published today by the central bank. A short is a bet an asset may lose value.