Chile Peso Extends Losing Streak to Longest Since 2007 After GDP

Chile’s peso dropped for a 10th day, extending its stretch of losses to the longest since November 2007, after a report showed the economy expanded in the first quarter slower than forecast.

The currency depreciated 0.4 percent to 483.28 per U.S. dollar at the close in Santiago, the weakest level since Nov. 16, 2012. Two-year swaps fell seven basis points, or 0.07 percentage point, to 4.43 percent, the lowest since July 25.

The peso weakened after the central bank reported that Chile’s economy expanded 4.1 percent in the first quarter from a year earlier, slower than the 4.5 percent median forecast of analysts surveyed by Bloomberg and the 5.7 annual rate posted in the fourth quarter.

“The GDP data were really weak and despite the globally weak dollar the peso seems like it’s heading for the 485 zone,” Katia Diaz, an economist at 4Cast Inc., said in a telephone interview from New York. “The weaker GDP cemented views that the central bank will cut rates.”

The peso’s decline may have been accentuated by selling before tomorrow’s market holiday, according to Diaz.

Foreign investors in the Chilean peso forwards market increased their net bet against the currency to an eight-month high of $10.3 billion on May 16, according to data published today by the central bank.

Chilean investment expanded 9.6 percent in the first quarter from a year earlier, compared with 18.1 percent in the previous three months, the central bank said. Mining rose an annualized 7.8 percent while manufacturing contracted 0.6 percent and retail gained 6.9 percent.

The dollar’s value in pesos passed through its upper 20-day Bollinger band of 482.06 per dollar, and its 14-day relative strength indicator rose further beyond 70, the level indicating that the peso’s drop may be hard to sustain.

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