Chile’s peso posted its biggest weekly gain since July as speculation the U.S. will adopt more stimulus measures boosted demand for higher-yielding assets and the Andean nation’s central bank said it sees less need to accumulate reserves.
The peso advanced 1 percent to 475.82 per U.S. dollar from 480.58 on Aug. 31, the biggest gain since the week ended July 27. It has strengthened 9.2 percent this year, the most among all currencies tracked by Bloomberg. Copper, Chile’s main export, rose to a 16-week high in New York today.
U.S. payrolls rose 96,000 in August, the Labor Department said today in Washington, trailing the 130,000 median forecast of analysts surveyed by Bloomberg. The report fueled bets the Federal Reserve will launch a third round of quantitative easing, known as QE3, to spur economic growth.
“The U.S. employment figure came out quite bad and that makes people speculate that a QE3 may be closer,” Alexis Osses, the head of research at xDirect Chile Ltda., said in a phone interview from Santiago. “As long as data from the U.S. continues to be weak, the peso will continue to trend higher toward 473.5 per dollar and if it breaks that level, it could go to 470 per dollar.”
Chile’s central bank President Rodrigo Vergara said today the monetary authority never rules out the option of intervening in the peso. Policy makers must carefully weigh costs and benefits of buying dollars, and the exchange rate isn’t out of line with fundamentals, he said.
“One rationale for the past interventions was the accumulation of reserves to build up for an eventual crisis,” he told reporters. “We had a major accumulation in both 2008 and 2011, so today naturally that argument has less strength.”
The National Statistics Institute today reported that prices rose 0.2 percent last month, less than the 0.3 percent median forecast of 14 economists in a Bloomberg survey. Separately, data released by the central bank today showed Chile had a trade deficit of $843 million last month, the biggest in four years.
Short-dated breakeven inflation dropped the most in two months today. The one-year breakeven inflation rate declined 17 basis points to 3 percent. The six-month breakeven inflation rate fell 44 basis points to 2.95 percent.
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