Chilean Peso Drops to 12-Year Low as Copper Declines on China

Chile’s peso fell to a 12-year low as copper plunged amid concern that China, the biggest buyer of the metal, is growing more slowly than official data suggest.

The peso slid 0.9 percent to 690.26 per U.S. dollar at 11:58 a.m. New York time. It was on course for its lowest close since 2003, when it weakened in the aftermath of the Asian crisis and Argentina’s default. Copper, which accounts for half of Chile’s exports, fell 1.6 percent in New York to a six-year low of $2.314 a pound. Three-month inflation-linked swaps slid 0.15 percentage point to minus 3.12 percent.

The benefit of the Chilean peso’s decline to exporters has been muted as other emerging-market currencies have fallen more. The peso has declined 12 percent this year, compared with a 21 percent plunge for the Colombia currency and a 24 percent tumble for Brazil’s real.

“This shock is negative because there isn’t a benefit and it has a negative impact on domestic consumption because it pushes up the price of imports,” said Felipe Alarcon, the chief economist at EuroAmerica in Santiago.

Chile’s real effective exchange rate, a trade- and inflation-weighted measure of the currency’s strength, was 95.79 in June, down from a five-year high of 101.13 last September. Non-copper exports from Chile were $2.8 billion last month, in line with the five-year average of $2.9 billion.

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