Bloomberg News

Chile Peso Falls Fourth Day as Copper Slump Dims Trade Prospects

October 20, 2011

Oct. 20 (Bloomberg) -- The Chilean peso weakened for a fourth day as copper’s biggest drop in a month signaled a diminished trade surplus for the metal’s top producing nation.

The peso slid 1.5 percent to 519.18 per U.S. dollar from 511.51 yesterday. The currency has weakened 3.7 percent since Oct. 14, second only to the South African rand among the 25 emerging-market currencies tracked by Bloomberg. The Bloomberg JPMorgan Latin American Currency Index dropped 1 percent today.

Copper for December delivery fell as much as 7 percent to $3.031 a pound on the Comex in New York after data showed Chinese growth slowed in the third quarter. The euro fluctuated between gains and losses after European Commission President Jose Barroso expressed optimism the region’s leaders would reach an agreement on changes to their debt bailout fund.

“There’s no trend here: each day has its own logic,” said Cristian Donoso, a trader at Banchile in Santiago. “Taking a position overnight is criminal. Today the drivers are the euro and copper in New York.”

Copper, which accounts for more than half of Chile’s exports, has slumped 31 percent in the past three months.

Foreign investors in the Chilean peso forwards market trimmed long positions in the U.S. dollar for a third day to $5.2 billion on Oct. 18, the lowest since Sept. 29, according to central bank data.

Swaps Drop

Interest-rate swap rates fell in every maturity from three months to 20 years. The one-year swap fell 8 basis points, or 0.08 percentage point, to 4.47 percent. One-year breakeven inflation fell four basis points to 2.33 percent.

Chile’s central bank sold $107 million of five-year and $85.3 million of 10-year inflation-linked bonds in an auction today, the bank said on its website.

The central bank set a yield of 2.06 percent on the five- year bonds, up from 1.78 percent at a similar auction on Oct. 4, and 2.35 percent on the 10-year bonds, up from 2.24 percent on Oct. 6.

Investors placed orders for 143 percent of the amount of five-year bonds offered and 244 percent of the amount of 10-year bonds offered. Banks bought 86 percent of the five-year and 95 percent of the 10-year bonds.

--Editors: James Attwood, Marie-France Han

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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