Chile Peso Leads Global Currency Gains on Surprise Rate Increase

  • Quarter-point increase responds to inflation, labor market
  • Chile's currency gained 1.4%, the most among world peers

The Chilean peso led gains among global currencies after the central bank increased interest rates earlier than economists had forecast and as copper, the nation’s chief export, rallied.

The peso rose 1.4 percent to 698.75 per dollar, closing stronger than 700 for the first time in five weeks. That was the best performance among 31 major currencies.

Chile’s central bank surprised analysts by raising borrowing costs for the second time this year, following a pause in November, with annual inflation running above the country’s 4 percent target for 2016. Moves in the Chilean peso also often follow the price of copper, which jumped 3.2 percent to $2.10 a pound in New York on speculation that smelters in China will hoard supplies to support prices that had been near a six-year low.

“The market was expecting a raise, but the timing, that it would come at this week’s meeting, wasn’t clear,” said Mario Castro, a strategist at Nomura Holdings Inc. in New York. “The significant rally in copper obviously also helps.”

Policy makers, led by bank President Rodrigo Vergara, raised the benchmark interest rate by a quarter point to 3.5 percent Thursday, as forecast by only 12 of 26 economists surveyed by Bloomberg. Fourteen expected no change.

The peso has declined 13 percent against the dollar in 2015 -- in the middle of the pack among the most-traded currencies worldwide -- and reached a 12-year low in November.

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