Bloomberg News

Chile Peso Climbs on Optimism for Deal on U.S. Debt Ceiling

August 01, 2011

Aug. 1 (Bloomberg) -- Chile’s peso climbed on optimism that the U.S. Congress will pass an agreement to raise the debt ceiling and avoid default, increasing investor appetite for riskier emerging-market assets.

The peso rose 0.2 percent to 456.85 pesos per U.S. dollar at 2:01 p.m. New York time, from 457.79 on July 29. The currency advanced 2.1 percent last month.

“The markets are taking the agreement in the U.S. as a positive sign,” Euguenio Cortes, head of currency forwards at Euroamerica Corredores de Bolsa, said in a telephone interview from Santiago. “As long as the dollar doesn’t rise strongly against other currencies, the peso will keep rising.”

U.S. Republican leaders, with no extra time before a default threatened for tomorrow, voiced optimism that Congress will pass a compromise with President Barack Obama to raise the U.S. debt limit by at least $2.1 trillion and slash federal spending by $2.4 trillion or more.

The House plans to vote today on the agreement reached during a weekend of negotiations that capped a months-long struggle between Obama and Republicans over raising the $14.3 trillion debt ceiling. Senate Majority Leader Harry Reid said he expects a vote “hopefully during” today’s session.

“The markets are less worried, so investors have more of an appetite for risk, which benefits the peso,” Cortes said.

Chile’s one-year interest-rate swap rate, which reflects traders’ views of future rates, fell six basis points, or 0.06 percentage point, to 5.52 percent.

--Editor: Glenn J. Kalinoski

To contact the reporter on this story: Bryan Gibel in New York at bgibel@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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