Chile Peso Falls Most in Emerging Markets as Foreigners Go Short

  • Foreign participants in the forwards market boosted shorts
  • Outlook for Chilean exports impaired by falling China trade

The Chilean peso weakened the most among emerging-market currencies as international investors offload their positions on the currency following weak data from China.

Foreign investors have increased short positions in the Chilean peso forwards market by $1.2 billion in the past week while local investors, mostly pension funds hedging their currency exposure, have refrained from adding to their long position in the currency. China on Monday reported that imports unexpectedly fell 11 percent in April from a year earlier, undermining the outlook for the price of copper, Chile’s principal export.

The peso depreciated 0.2 percent to 680.21 per dollar at the close on Wednesday and has lost 1.5 percent in the past five trading sessions, the most among 24 emerging-market currencies tracked by Bloomberg. The peso has weakened 3 percent since reaching a nine-month high of 659.74 per dollar on April 20.

"This week we’ve seen a lot of international banks selling the peso," Eugenio Cortes, head of currency forwards trading at Euroamerica Corredores de Bolsa SA, said by e-mail.

Strategists at Citigroup Inc. on Monday recommended reducing bets on emerging-market currencies and forecast that the Chilean peso will depreciate on weak Chinese data, according to a note written by strategists Dirk Willer and Kenneth Lam.

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