International investors in the Chilean peso forwards market reduced their bets against the currency to the smallest in seven weeks as the strength of the domestic economy blunts concern about slowing global growth.
Traders outside of Chile had a $9 billion short peso position on July 5, the smallest since May 18, according to central bank data published today.
The peso is the best-performing Latin American currency in the past five trading days, appreciating 1.2 percent as Brazil’s real depreciated 2.4 percent. Chile’s economy grew 5.3 percent in the 12 months through May and last month the country posted its third trade surplus of at least $1 billion in four months, beating the $700 million estimate of economists surveyed by Bloomberg. Chile’s 5 percent benchmark interest rate means that holders of the peso can benefit from the differential between peso and dollar rates.
“There is downward pressure on the dollar in Chile because although we had low inflation, economic activity indexes are strong,” said Eugenio Cortes, head of currency forwards at EuroAmerica Corredores de Bolsa SA. “It’s expensive to stay long dollars, but if you go long pesos you get paid every day.”
The peso gained 0.8 percent to an eight-week high of 494.44 from 498.45 on July 6. Local investors, led by pension funds and excluding banks and brokers, had a $16.9 billion long peso position, down from $17.5 billion a day earlier.
Flavia Cattan-Naslausky, a currency strategist at RBS Securities Inc. in Stamford, Connecticut, says the Chilean peso may outperform the dollar and the Colombian peso because of the resilience of Chile’s economy. Chinese inflation at a 29-month low may make it easier for authorities to stimulate growth in the biggest buyer of Chilean copper, Cattan-Naslausky said.
Investors willing to add risk should take small positions in the Chilean and Mexican pesos against the dollar, she said.
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