Bloomberg News

Chile Peso Heads to Longest Winning Streak in Month on Europe

December 07, 2011

Dec. 6 (Bloomberg) -- Chile’s peso advanced for a fifth day, the longest winning streak in a month, after Standard & Poor’s warning that it may cut credit ratings on European governments spurred speculation that regional policy makers will act to prevent the continent’s debt crisis from worsening.

The peso strengthened as much as 0.2 percent to 512.55 per U.S. dollar, from 513.55 per dollar yesterday. It was up less than 0.1 percent at 11:23 a.m. in Santiago. The currency last rose for five consecutive days in the period ending Oct. 27.

French and German bonds fell after S&P said it may downgrade 15 euro-area governments, including six rated AAA, depending on the result of a summit of European leaders this week. Germany’s Finance Minister Wolfgang Schaeuble said the warning would encourage European leaders to resolve their debt crisis at the meeting on Dec. 8 to Dec. 9.

“Everybody’s waiting to see what happens on Friday,” said Matias Madrid, chief economist at Banco Penta in Santiago.

The yield on Italian 10-year bonds fell to a seven-week low of 5.8 percent from 5.94 percent yesterday and 7.2 percent a week ago, after Prime Minister Mario Monti presented a package of budget cuts aimed at reducing the country’s debt. Copper, which makes up more than half of Chile’s exports, fell as much as 2.5 percent.

“Appreciative pressure comes from expectations ahead of this week’s European summit” said Osvaldo Cruz, an economist at Banco de Credito e Inversiones in Santiago. “Our short-term view is that the peso could go to 507 per dollar, but a lot depends on what happens in Europe this weekend.”

Offshore investors in the Chilean peso forwards market trimmed their bets against the currency to $4.8 billion on Dec. 2 from $5.1 billion a day earlier.

Swap and bond yields were little changed.

--Editors: Brendan Walsh, Richard Richtmyer

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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