Bloomberg News

Chilean Peso Reaches Two-Week High on Buying by Pension Funds

January 02, 2012

Jan. 2 (Bloomberg) -- Chile’s peso gained to a two-week high, outpacing the region’s other currencies, on buying by local pension funds.

The currency gained 0.2 percent to 518.65 per U.S. dollar at the close in Santiago, the strongest since Dec. 16.

Chile’s pension funds had $133 billion of assets under management at the end of November, the equivalent of 65 percent of the country’s gross domestic product. The funds must take long peso positions to offset their foreign currency exposure when they buy assets abroad.

“It’s not moving on external markets,” said Sebastian Momberg, a trader at BCI Corredor de Bolsa SA in Santiago. “There is buying from local financial institutions: pension funds.”

The move occurred amid light volumes. As of 12 p.m. $329 million of trades had occurred, compared with a daily average of $1.3 billion in December, according to data from the Electronic Stock Exchange.

Interest-rate swap rates climbed. The one-year interest- rate swap rate increased five basis points to 4.38 percent.

Offshore investors increased their short position in Chilean peso forwards to $6.1 billion from $6 billion on Dec. 29, according to central bank data.

Short-term borrowing costs, which spiked last month amid a liquidity squeeze, slid today. The interest rate banks must pay to borrow for between 90 and 365 days fell to a two-week low of 5.88 percent on Dec. 29.

The average monthly yield of a term deposit due in less than 30 days fell to 0.44 percent today from 0.46 percent on Dec. 30, according to the Santiago stock exchange.

--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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