Chie’s peso fell to its lowest level since the start of the year as rising bond yields in Spain and Italy fueled bets Europe’s debt crisis is worsening, pushing down prices for the South American country’s copper exports.
The peso tumbled 1.1 percent to 518.26 per dollar as of 11 a.m. in Santiago, and earlier dropped to 518.67, the lowest since Jan. 2. The Bloomberg JPMorgan Latin American Currency Index fell 1 percent. The Chilean peso’s 6.4 percent decline this month is the second-worst among major regional currencies tracked by Bloomberg, outperforming only the Mexican peso.
Yields on Spain’s 10-year bonds rose to 6.59 percent, approaching the 7 percent mark that preceded bailouts in Greece, Ireland and Portugal. Stocks fell and the euro reached a two- year low against the dollar while copper, Chile’s main export and a key driver of its currency, fell as much as 2.5 percent to $3.3765 a pound on the Comex in New York.
“The currency is basically following what is going on outside,” said Alejandro Cuadrado, a Latin American currency strategist at Banco Bilbao Vizcaya Argentaria SA (BBVA) in New York. “As the market gets weaker we could go all the way to 525 per dollar.”
Currencies of other commodity exporters also sank today. South Africa’s rand fell 2.2 percent and the Australian dollar slid 1.2 percent. The peso is on course for its steepest monthly decline since September.
Offshore investors trimmed bets against the peso for a second day on May 28 to $9.6 billion after they reached $10.2 billion, the highest on record, on May 25.
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