Chile Peso Drops to Six-Week Low as Global Outlook Sinks Copper
Chile’s peso fell to a six-week low as the price of copper, the country’s biggest export, plunged on a weaker outlook for global economic growth.
The currency depreciated 0.3 percent to 473.39 per U.S dollar at 10:03 a.m. in Santiago, the weakest on a closing basis since March 4. The peso has dropped 0.3 percent since the end of January while copper has declined 14 percent.
“The gap with copper is too big and we have a selling bias,” Alejandro Cuadrado, a currency strategist at Banco Bilbao Vizcaya Argentaria SA (BBVA), said in a telephone interview from New York. “This is one of our least favorite currencies in Latin America at this juncture.”
The global economy will expand 3.3 percent this year, slower than forecast in January, the International Monetary Fund reported yesterday. The IMF cut the estimate for growth in China, the biggest buyer of Chile’s copper, to 8 percent.
Copper futures dropped 2.9 percent to $3.2270 per pound today. Copper, used in cars and new buildings, makes up almost half of Chile’s exports.
The peso has declined 1.3 percent from a 19-month high reached April 8. The sell-off may curb speculation that the central bank will intervene to weaken the currency, Cuadrado said.
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