Chilean Local Investors Cut Peso Positions to Lowest Since 2009

Chilean local investors cut bets in the forwards market on the peso beating the dollar to the lowest in almost four years.

Local investors, including pension funds and insurers and excluding banks and some brokers, had an $11.6 billion long peso position on Jan. 29, the lowest level since March 2009. The currency was little changed at 471.25 per U.S. dollar at the close in Santiago. The peso gained 1.7 percent this month.

At the end of December, $12 billion of the $14 billion total long peso position among local investors was held by pension funds. Local investors have cut their long peso position by $4.9 billion since new rules on currency hedging for pension funds went into effect Dec. 1.

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

International investors in the Chilean peso forwards market had a $1 billion net short peso position on Jan. 29, according to central bank data. That is the lowest since September 2011. International investors have cut their net short position by $6.1 billion since the end of November.

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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