Bearish Wagers on Chile Peso Jump With Currency Near 12-Year Low

  • Net position in NDF market shows most pessimism since March
  • Currency is weakening as copper slumps on Chinese slowdown

Bearish wagers on Chile’s peso climbed to a six-month high as the currency traded near the lowest level since 2003.

Bets against the peso in the non-deliverable forwards market climbed to $9.2 billion on Friday, the most since March, according to data published by the central bank Tuesday. The currency has tumbled 15 percent this year amid a plunge in copper, which makes up 49 percent of all Chile’s exports, and speculation that higher U.S. interest rates will dim the appeal of emerging-market currencies.

“That’s a faithful reflection of fundamentals,” said Felipe Alarcon, the chief economist at EuroAmerica in Santiago. “This scenario is likely to continue until the Fed decision in December.”

Prospects for an end to near-zero U.S. interest rates have dragged down currencies from developing nations in 2015 because they undercut the case for investing in riskier assets that offer higher returns. Futures show a 66 percent chance the Federal Open Market Committee will announce a rate increase by Dec. 16, up from a 50 percent probability at the end of October.

Chile’s peso strengthened 0.7 percent Tuesday to 708.58 per U.S. dollar as of 11:23 a.m. in Santiago, after closing at 713.18 per dollar on Monday, its weakest against the dollar since August 2003.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE