Chilean Peso Advances as Offshore Net Bets Against Currency Drop

Chile’s peso, the best-performing emerging-market currency this year, gained as international investors in the forwards market cut net bets against the currency amid signs of economic strength.

The peso appreciated 0.2 percent to 471.35 per U.S. dollar at the close in Santiago, extending its rally in the first days of 2013 to 1.7 percent, the most among 25 emerging-market currencies tracked by Bloomberg. Foreign investors cut their net short peso position to $3.3 billion on Jan. 7, the lowest level in 15 months, from $6.7 billion a month earlier, according to central bank figures published today.

The currency gained after a Jan. 7 report showed the economy grew 5.5 percent in November from a year earlier, beating economists’ expectations for a fourth straight month. The peso dropped yesterday from a three-month intraday high after Finance Minister Felipe Larrain said the government was concerned about the currency’s strength.

More offshore investors are betting on the appreciation of the peso, and “there’s still a bit of swing left before the central bank intervenes,” said Mauricio Olivares, a currency trader at the Chilean unit of Bank of Nova Scotia in Santiago.

The central bank gathers information on the market positions of banks and five brokerages and publishes them daily, on a two-day lag.

A short position is a bet that a currency will fall. A net short position occurs when the amount of bets against the currency is greater than the amount wagered on an increase. Foreign investors typically have a net short position because the figure includes hedging by mining companies and others of their long-term investments in Chile.

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