- Correlation with commodity jumps to highest since May 2014
- Chinese copper smelters to cut 2016 output as prices tumble
The Chilean peso led gains among emerging-market currencies as copper, the nation’s chief export, rallied after Chinese smelters said they’ll cut output to bolster prices.
The peso strengthened 1.2 percent to 703.02 per dollar Tuesday, the most since Sept. 16. Copper advanced as suppliers including Jiangxi Copper Co. and Tongling Nonferrous Metals Group Co. pledged to reduce production next year by 350,000 metric tons. That’s about 4.4 percent of China’s annual output in 2014. The correlation of the currency with the commodity climbed to the highest level since May 2014, according to data compiled by Bloomberg.
"It’s purely an effect of copper as the correlation with the metal is getting stronger," Matias Madrid, an economist at Banco Penta, said from Santiago.
The Chilean peso has plunged 14 percent this year as a slowdown in China’s demand for commodities sent copper prices tumbling. The currency also slid amid speculation that an increase in U.S. borrowing costs would reduce the appeal of developing-nation assets. The peso has rebounded from a 12-year low last week as some traders that had bet on a further depreciation bought the currency to cover their losses, according to Bloomberg foreign-exchange strategist George Lei.
The next key technical resistance level is 700 pesos per dollar, he said.