Bloomberg News

Chile Peso Slides as Copper Declines, Emerging Currencies Weaken

December 12, 2011

Dec. 12 (Bloomberg) -- Chile’s peso weakened the most in two weeks amid a sell-off in emerging-market currencies as disappointment spread following last week’s European Union summit and the price of copper fell.

The peso declined 0.9 percent to 514.54 per U.S. dollar at the close of trading in Santiago, from 509.95 on Dec. 9. The Bloomberg JPMorgan Latin American Currency Index slid 1.4 percent.

Copper, which makes up more than half of Chile’s exports, declined as much as 3.4 percent to $3.435 per pound on speculation demand from China may weaken. All but three of 25 emerging-market currencies tracked by Bloomberg declined today and stocks sank after Moody’s Investors Service said it will review the ratings of all EU countries in the first three months of next year.

“The market has realized that nothing really happened, and the disappointing summit prompted Moody’s to say that the measures don’t lessen the risk of downgrades,” said Katia Diaz, an economist at 4Cast Inc. in New York. “Copper’s down on speculation of lower demand from China, so that’s adding to weakening pressure on the peso. We expect the focus to remain on Europe.”

The peso may weaken as far as 520 per dollar after passing the 515 per dollar level, Diaz said.

Offshore investors in the Chilean peso forwards market increased their bets against the currency to $5 billion on Dec. 7 from $4.6 billion on Dec. 6, according to central bank data published today.

--Editors: Glenn J. Kalinoski, 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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