Chile’s peso held within 0.1 percent of a four-month high as strategists split on whether the central bank might intervene for the first time since 2011 to slow the rise of Latin America’s strongest currency this year.
The peso was little changed at 471.19 per U.S. dollar at the close in Santiago. It reached 470.95 on Jan. 10, the highest since Sept. 26 on a closing basis. The peso has gained 1.6 percent this year, the most of seven Latin American currencies tracked by Bloomberg.
The currency’s appreciation has fueled speculation that the central bank might act, according to BNP Paribas SA. The government is concerned that the strength of the peso is squeezing margins for exporters, President Sebastian Pinera said on Jan. 17.
“In the last few weeks we have seen investors moving out of the market at these levels and then coming back in at 475 per dollar,” said Alejandro Cuadrado, a strategist at Banco Bilbao Vizcaya Argentaria SA in New York. “We’re going to keep hovering around this level.”
Cuadrado doesn’t expect the central bank to announce an intervention in the currency until it has appreciated further, he said. He estimates the peso will strengthen to 465 per dollar.
The central bank said Jan. 17 that the peso had appreciated “slightly” against the dollar.
“The fact that they softened the language speaks of a non-imminent risk,” Cuadrado said.
BNP Paribas strategists Diego Donadio and Thiago Alday recommend betting that the currency will weaken because of the likelihood of intervention. The market is being “too complacent,” they wrote yesterday in a note to clients. Investors should pull out of the bet to minimize losses if it strengthens to 469 per dollar, they wrote.
Chile’s real exchange rate, a measure of the peso’s inflation-adjusted strength against its trading partners was 88.2 in December compared to 87.4 in December 2010, according to central bank data, shortly before the last intervention. The measure reached 87.53 in October. A lower number indicates a stronger peso.