Chile’s peso weakened as copper, the country’s biggest export, fell after slower-than-forecast growth in China curbed the outlook for demand.
The peso declined 0.6 percent to 484.95 per U.S. dollar today and posted a 0.2 percent decline in the past five days. Copper for May delivery sank as much as 3.1 percent in New York to $3.6055 per pound. This week, the price of the metal fell below $3.70 for the first time since January.
China’s economy grew 8.1 percent in the first quarter from a year earlier, less than the 8.4 percent median estimate of analysts surveyed by Bloomberg and the slowest in almost three years. Copper makes up more than half of Chile’s exports and China bought more than a third of the country’s $11.6 billion of exports of the metal in the fourth quarter of last year.
“Less growth in China impacts copper, which has fallen below the important $3.70-a-pound level,” said Eugenio Cortes, head of currency forwards at EuroAmerica Corredores de Bolsa SA.
Brazil’s real fell 0.8 percent this week, the Colombian peso 0.1 percent and the Mexican peso 1.3 percent.
“The dollar in Chile isn’t reflecting the negative external environment, because the local market is betting on the central bank raising rates,” Cortes said. “On days like yesterday when things are calm the dollar falls fast, but the news from China today has stopped it breaking its range.”
Offshore investors in the forwards market had a $6.9 billion bet against the Chilean peso on April 11, according to central bank data published today. Local investors had a $15.8 billion long position, down from $17.5 billion at the end of March.
Chilean breakeven inflation and interest-rate swaps retreated this week even after the central bank said it expected the path of interest rates to match that priced into financial markets.
Two-year breakeven inflation fell seven basis points, or 0.07 percentage point, today to 3.25 percent. Two-year swap rates sank nine basis points to 5.31 percent, the lowest since March 22.
Swap rates in developed markets also declined today. The U.S. five-year swap rate fell two basis points, the five-year swap rate in pounds fell three basis points and the five-year swap rate in Australian dollars plunged 10 basis points to 4.22 percent.
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