Bloomberg News

Chile Peso Snaps Winning Streak as Copper Dims Trade Outlook

March 12, 2012

Chile’s peso fell for the first time in four days as signs of a Chinese economic slowdown pushed down copper prices, dimming trade prospects for the biggest producer of the metal.

The peso depreciated 0.5 percent to 485.45 per U.S. dollar at the close in Santiago after gaining 1.7 percent in the previous three days.

Copper, which accounts for more than half of Chile’s exports, fell as much as 1.1 percent in New York after China reported its largest trade deficit since at least 1989. Copper stockpiles in Shanghai are at the highest level since at least 2003 as inventories tracked by the London Metal Exchange shrink.

“It’s all the external scenario,” said Matias Madrid, an economist at Banco Penta in Santiago, referring to the peso’s decline. “The Chinese trade balance came out very negative and that’s hitting copper.”

The peso strengthened the most in a month on March 8 when a report showed consumer prices rose 0.4 percent in February, double the median estimate of 18 economists surveyed by Bloomberg.

Chilean Finance Minister Felipe Larrain said today the government is concerned by rising estimates for consumer prices. February’s pick-up in inflation reflected some one-time factors, Larrain said at an event in Santiago today.

Three-month breakeven inflation, the gap between nominal and inflation-linked yields in the swaps market, fell 19 basis points, or 0.19 percentage point, to 4.37 percent, while two- year breakevens dropped eight basis points to 3.43 percent.

The yield on a basket of central bank 10-year inflation- adjusted bonds rose four basis points to 2.48 percent.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net NI CLECO NI CMD NI CMDX NI COPPER NI DRV NI EMD NI FRX NI MET NI NONFERR NI ORIGINAL NI CLM


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