Chile Peso Weakens as Italian Elections Stalemate Boosts DollarSebastian Boyd
Chile’s peso declined as the inconclusive result of Italian elections spurred concern Europe’s debt crisis may worsen, sapping global growth.
The peso fell 0.1 percent to 473.5 per U.S. dollar at the close in Santiago. The U.S. currency rose against most of its major counterparts on demand for a refuge.
“It’s related to what’s happening in the international environment, especially Europe, today and the Italian elections,” said Sebastian Senzacqua, an economist at Bice Inversiones in Santiago. “Lots of currencies are depreciating and that includes ours, which isn’t a safe haven.”
European stocks fell and Italy’s borrowing costs climbed to a three-month high as the country’s elections signaled the world’s third-largest debtor may not continue with cost-cutting reforms. The stalemate threatens to derail 15 months of austerity under Prime Minister Mario Monti’s government, reviving speculation the country will struggle to pay its debt.
Chile’s two-year swap rate in pesos fell two basis points, or 0.02 percentage point, to 5.16 percent. It earlier touched a two-month low of 5.14 percent.
The one-year breakeven inflation rate fell two basis points to 2.98 percent after Finance Minister Felipe Larrain said the government would temporarily cut fuel tax to ease price increases.
Traders in the forwards market for unidades de fomento, Chile’s inflation-linked accounting unit, are pricing in 0.24 percent price increases this month from last. That’s down from 0.25 percent yesterday.