Bloomberg News

Chilean Peso Weakens as Greek Swaps Ruling Damps Riskier Assets

March 01, 2012

Chile’s peso weakened as traders sought assets perceived as safer after the swaps association ruled that investors who had insured themselves against a Greek debt default won’t get paid.

The peso depreciated 0.3 percent to 480.75 per U.S. dollar as of 10:11 a.m. in Santiago, extending yesterday’s 0.6 percent drop following remarks by Federal Reserve chairman Ben S. Bernanke that failed to indicate further quantitative easing is planned.

The determinations committee of the International Swaps & Derivatives Association today said the European Central Bank’s exchange of Greek bonds for new securities exempt from losses being imposed on private investors hasn’t triggered $3.25 billion of outstanding credit-default swaps. The euro, which yesterday weakened 1 percent against the dollar, extended that decline today after the ISDA statement. The euro and peso moved in the same direction versus the dollar on 182 of the last 282 trading days.

“People here are buying dollars because the euro fell so much,” said Ronal Volpi, head of spot currency trading at EuroAmerica Corredores de Bolsa SA in Santiago. “Commodities are holding solid, but there’s really a lot of dollar buying.”

Euro-area finance ministers are meeting in Brussels to review Greece’s progress on meeting the conditions of the 130 billion-euro ($173 billion) aid package, which they approved last week, clearing the way for payment ahead of 14.5 billion euro bond payment on March 20.

Offshore investors in the peso forwards market trimmed their short position in the Chilean peso to a four-week low of $4.2 billion on Feb. 28.

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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