Chilean Peso Volatility Reaches 3-Month High Amid Copper Slump

  • Copper falls after Goldman Sachs cuts estimates for metal
  • Low trading volumes also exacerbate Chile peso volatility

Expectations for Chilean peso price swings are increasing as copper, the country’s main export, falls for a third straight day.

The peso’s one-month implied volatility reached 13.4 percent Tuesday, the highest since Oct. 26. The peso fell 0.8 percent to 715.35 per dollar at 11:57 a.m. in Santiago, the most among major emerging-market currencies after the Mexican peso. The currency has weakened 2.6 percent in the last three days.

Copper fell the most since September after Goldman Sachs Group Inc. said that it could lose another 10 percent by year-end as there are no signs that Chinese demand will recover in 2016. The slowest economic expansion in China for a generation has led to the oversupply of metals and sent copper prices down to six-year lows. Producers including Glencore Plc and Freeport-McMoRan Inc. have announced cuts to copper output to ease the glut.

"Copper is clobbering the peso, particularly today," Matias Madrid, an economist at Banco Penta, said by phone from Santiago. "Volumes are low and that is also increasing volatility."

Average volume traded in the local market has fallen to $1.6 billion per day in February, according to Datatec. This compares with an average of $2.1 billion in 2015 and $2.5 billion in 2014.

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