Bloomberg News

Chile Peso Snaps Winning Streak as Copper Falls on China Concern

October 13, 2011

Oct. 13 (Bloomberg) -- The Chilean peso fell for the first time in seven days as the price of copper slumped and global stocks retreated after the European Central Bank said that forcing investors to take losses on bailouts would hurt banks.

The peso slid 1.2 percent to 505.08 per U.S. dollar after surging 7.1 percent in the previous six days. Interest-rate swap rates fell before a central bank policy meeting today.

Copper, which makes up more than half of Chile’s exports, fell as much as 2.7 percent on concern that Europe’s lingering sovereign-debt crisis may hamper economies in Asian countries such as China. Stocks in Europe weakened, dragging the MSCI World Index down 0.6 percent after six days of increases.

“It’s retracing some gains,” said Katia Diaz, an economist at 4Cast Inc. in New York. “Copper is down on weak Chinese trade data and there have been reports of record high inventories in China, which place a limit on the upside for the peso.”

Exports from China, the biggest buyer of the metal, rose at the slowest annual pace in seven months in September. Chinese copper inventories climbed to a record 1.9 million metric tons by the end of last year.

The central bank probably will keep its benchmark rate unchanged at 5.25 percent today, according to the median forecast of 20 economists surveyed by Bloomberg.

The one-year interest-rate swap rate fell four basis points today to 4.41 percent, after rising in five straight sessions. The two-year swap rate fell nine basis points to 4.19 percent.

The one-year inflation-linked swap rate was little changed at 2.04 percent. It has risen from a four-month low of 1.52 percent on Oct. 4.

The one-year breakeven inflation rate fell to 2.32 percent, the lowest since Aug. 11. The inflation forwards market is pricing in average inflation of 2.72 percent in the 12 months from October 2011 to 2012, according to Bloomberg calculations. Prices will rise 0.18 percent this month, according to forwards prices.

--Editors: James Attwood, Brendan Walsh

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net

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


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