Bloomberg News

Chilean Peso Weakens as Copper Declines, Dollar Gains on Asia

December 20, 2011

Dec. 19 (Bloomberg) -- Chile’s peso depreciated as copper fell on speculation demand from China may ease and as concern of greater instability in Asia following the death of North Korea’s leader increased demand for the dollar as a haven.

The peso weakened 0.6 percent to 520.75 per U.S. dollar from 517.6 on Dec. 16. The Bloomberg JPMorgan Latin American Currency Index slid 0.3 percent.

Home prices in China had their worst performance of the year last month, with more than half of the 70 biggest cities monitored recording declines. The country is the biggest buyer of copper, which makes up more than half of Chile’s exports and is used in new homes and cars. The dollar gained after the death of North Korea’s Kim Jong Il prompted concern that a chaotic transition of power would threaten regional security.

“We’re following copper and the euro,” said Cristian Donoso, a currency trader at Banchile Inversiones in Santiago. “Stocks and commodities are weak and the dollar is gaining ground against its counterparts.”

Copper for March delivery slid 1.2 percent.

Offshore investors in the Chilean peso forwards market increased their bets against the currency to $5.5 billion on Dec. 15, the biggest short position in the peso so far this month, according to central bank data published today.

Inflation-linked central bank bond yields fell. The yield on the bank’s 3 percent bonds due in 2021 fell four basis points, or 0.04 percentage point, to 2.49 percent, the lowest since Oct. 25. The yield on similar five-year bonds fell three basis points to 2.40 percent, the lowest since Nov. 25.

--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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