Bloomberg News

Chile Peso Reaches Seven-Week Low on German Bond Stumble, Copper

November 24, 2011

Nov. 23 (Bloomberg) -- Chile’s peso fell to a seven-week low as Germany’s failure to find buyers for all bonds offered in an auction eroded demand for riskier, emerging-market assets.

The peso lost 1.2 percent to 524.56 per U.S. dollar as of 10:31 a.m. in Santiago, from 518.42 yesterday. The Bloomberg JPMorgan Latin American Currency Index fell for an eighth straight day, sliding 1 percent, as all but two of 25 emerging currencies tracked by Bloomberg weakened against the dollar.

The euro dropped after Germany failed to get bids for 35 percent of the 10-year bonds it offered for sale today, an indication that the European debt crisis is driving investors away from the continent’s largest economy and the safest borrower among countries that use the euro. Copper, which made up 59 percent of Chile’s exports in the first three weeks of this month, declined 2.6 percent to $3.26 a pound for March delivery on the Comex in New York.

“This is clearly the external situation, triggered by Germany,” said Matias Madrid, an economist at Banco Penta in Santiago. “The higher dollar and falling copper are hitting the Chilean peso.”

It probably won’t weaken beyond 528 per dollar, he said.

Offshore investors in the Chilean peso forwards market increased their net short position in the currency to $5.5 billion on Nov. 21, the biggest bet against the peso since Oct. 14.

--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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