Bloomberg News

Chile Peso Tumbles as Bernanke Comments Boost Demand for Dollar

June 08, 2012

Chile’s peso plunged, snapping its biggest rally in seven months, after Federal Reserve Chairman Ben S. Bernanke lowered expectations for stimulus measures and data showed prices were unchanged in the South American country.

The peso dropped 0.5 percent to 502.87 per U.S. dollar at 11:02 a.m. in Santiago. It appreciated 3.6 percent in the four days through yesterday. The currency rose yesterday after China, the biggest buyer of Chilean exports, cut interest rates for the first time since 2008.

Copper, Chile’s biggest export, fell the most in three weeks and the dollar gained after Bernanke said yesterday the Fed would need to assess conditions before deciding on a third round of quantitative easing.

“China has acted, but after Bernanke’s press conference implied no QE3 for now, it’s going back,” said Cristian Donoso, a trader at Banchile Corredores de Bolsa SA in Santiago.

Consumer prices in Chile were unchanged in May, the National Statistics Institute said today. The central bank will probably keep interest rates unchanged at 5 percent after the slower-than-forecast inflation reading, according to economists Alberto Ramos at Goldman Sachs Group Inc. in New York and Cristobal Doberti at Bice Inversiones in Santiago.

The two-year swap rate fell seven basis points to 4.65 percent.

Copper for July delivery fell as much as 3.2 percent to $3.2635 a pound on the Comex in New York. The decline in the price of copper, which makes up half of Chile’s exports, comes after the Andean country yesterday reported the widest trade deficit since 2008.

International investors in the Chilean peso forwards market had a $10.1 billion short peso position on June 6, the central bank reported, down from a record $10.2 billion on May 24.

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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