International Investors Increase Net Bets Against Chilean Peso

International investors in the Chilean peso forwards market increased bets against the currency this month after cutting them to a 16-month low on Jan. 31.

Investors based outside Chile had a net $1.6 billion bet against the currency on Feb. 8, compared with $671 million on Jan. 31, according to data published today by the central bank. The peso, which has traded between 471 and 474 per dollar this month, gained 0.1 percent to 471.83 at the close in Santiago.

Investors are adding to their net bets against the Chilean peso after Finance Minister Felipe Larrain wrote a Feb. 4 editorial in the Financial Times suggesting that limits on foreign-exchange exposure for banks may help slow currency appreciation.

Strategists at BNP Paribas SA have recommended taking a short position in the peso versus the Mexican and Colombian currencies, while Banco Bilbao Vizcaya Argentaria SA recommends investors not add to long positions in Chile.

“There’s a feeling that we’re getting close to intervention,” said Alejandro Cuadrado, a currency strategist at BBVA in New York.

Societe Generale SA on Feb. 7 recommended betting that the peso will beat the Brazilian real. Deutsche Bank AG recommends betting the peso beats the euro.

The positioning data, published daily by the central bank with a two-day lag, tracks the positions of Chilean banks and some brokers against domestic and international counterparties. Local investors, a category that comprises pension funds and excludes banks, increased net long peso positions by $606 million on Feb. 8 from Jan. 31.

“This started with Larrain’s comments in the FT when he talked about not ruling out macro-prudential measures,” said Felipe Alarcon, an economist at Banco de Credito & Inversiones in Santiago.

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