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Chile Peso Extends Biggest Emerging-Market Gain on Economic Data

Chile’s peso, the strongest emerging-market currency this year, rose to a three-month high after economic activity expanded faster than forecast and the country posted its biggest trade surplus since April 2011.

The peso climbed 0.4 percent to 471.22 per U.S. dollar at the close in Santiago, the highest since Sept. 26. The currency has appreciated 1.7 percent this month, the most among 25 emerging-market currencies tracked by Bloomberg.

Economic activity grew 5.5 percent in November from a year earlier, the central bank said today, more than the 5.2 percent median forecast of 16 economists surveyed by Bloomberg. A separate report showed that Chile had a $1.5 billion trade balance on December, exceeding estimates for $200 million.

“The dollar is falling on local data,” said Ronald Volpi, the head of spot currency trading at EuroAmerica Corredores de Bolsa SA in Santiago. “We had good growth and excellent copper exports. We’re full of dollars.”

Chile exported $4.7 billion of copper in December, accounting for 61 percent of the country’s goods sent abroad, according to the central bank.

The peso is also being driven higher as Principal Financial Group Inc. buys the local currency as part of its tender offer for the shares of Chilean pension-fund manager AFP Cuprum held by minority investors, according to Felipe Alarcon, an economist at Banco de Credito & Inversiones in Santiago. Des Moines, Iowa-based Principal is paying 713.4 trillion pesos ($1.5 billion) to buy Cuprum.

Swap Rate

Chile’s one-year basis swap rate rose 17 basis points, or 0.17 percentage point, to a six-month high of 32 basis points.

International investors in the Chilean peso forwards market had a $3.9 billion short peso position on Jan. 3, the smallest since November 2011. Local investors had a $14.1 billion long peso position, up from the 13-month low reached on Jan. 2.

The yield on 10-year inflation-linked bonds rose to a 12-month high of 2.72 percent, a 20 basis point increase this year. The yield on two-year inflation-linked bonds fell four basis points to 2.84 percent and the yield on five-year inflation bonds fell seven basis points to 2.75 percent.

The decline in the shorter-term yields reflects higher inflation expectations, Alarcon said.

“The yields were pricing in very little inflation and they’ve now started to turn around,” he said. “We have had some major increases in fuel prices.”

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