Chile’s peso rose, extending its biggest weekly rally in a month, as copper prices rose on speculation China will act to bolster growth and after the central bank refrained from cutting its target lending rate.
“The main mover today is the expectation of stimulus measures in China, which is boosting commodity prices,” Hernan Jimenez, an analyst at ForexChile, said in a telephone interview from Santiago. “The central bank’s decision to keep rates unchanged, although expected, also helps as it creates a carry trade opportunity.”
The peso appreciated 0.7 percent to 490.65 per U.S. dollar at the close in Santiago, extending its weekly rally to 1.6 percent, the most since the five days ended June 8.
The central bank held its target lending rate at 5 percent for a sixth consecutive month yesterday, matching the forecast of all 16 analysts surveyed by Bloomberg. Policy makers last lowered borrowing costs in January, surprising economists with a reduction of a quarter-percentage point.
In a carry trade, investors borrow funds where interest rates are low and buy assets in nations that offer higher yields.
Prices for copper, Chile’s biggest export, rose as much as 2.7 percent today. The metal got a boost as China reported gross domestic product rose 7.6 percent in the second quarter from a year earlier, the slowest pace in three years, putting pressure on the Asian nation’s government to take further steps to spur expansion.
One-year breakeven inflation, a measure of the average annual pace of future consumer price increases implied by bond yields, fell 8 basis points, or 0.08 percentage point, to 1.74 percent, while two-year breakevens retreated 8 basis points to 2 percent.
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