Chile’s peso declined as copper, the nation’s biggest export, fell on concern stimulus measures from the U.S. to Japan may fail to bolster the global economy.
The currency depreciated 0.1 percent to 470.61 per dollar, paring its rally in the third quarter to 6.5 percent, still the best performance among the greenback’s most-traded Latin American counterparts. The peso advanced 1.2 percent yesterday, the most in two months.
“Yesterday’s rise wasn’t really well-founded, and today copper is falling,” said Eugenio Cortes, the head of currency forwards at EuroAmerica Corredores de Bolsa SA in Santiago. “The news due in coming days is more likely to be bad than good, the stimulus is already priced in, and now we have to wait and see if it works.”
Copper dropped after Federal Reserve Bank of Philadelphia President Charles Plosser said yesterday that new asset purchases announced this month probably won’t boost growth or hiring. Spanish bond yields rose the most in September as demonstrators planned a second night of protests in Madrid.
The peso touched 469.70 per U.S. dollar yesterday, trading in a range of 476.01 to 469.50 over the past seven days.
“The market sees the risk of central bank intervention below 470, which creates a natural floor,” Cortes said. “At 475, we see more appetite because we’re out of the risk of central bank intervention.”
International investors in the peso forwards market had a net $8.8 billion short peso position on Sept. 24, up from a one- month low of $8.5 billion on Sept. 21.
Interest-rate swap rates fell for a fifth straight day. The two-year rate dropped six basis points to 4.84 percent.
Shorter maturities of inflation-linked swap rates rose while longer ones slid. The two-year rate increased one basis point to 1.94 percent, and the 10-year inflation-linked swap rate dropped three basis points to 2.24 percent.
Two-year break-even inflation in the swaps market, a measure of inflation expectations, decreased seven basis points to a one-month low of 2.84 percent.
Trading of swaps indicates at least one cut in the target lending rate in the next 12 months. That contrasts with a survey of traders and investors published today by the central bank showing they expect the rate to remain unchanged at 5 percent for at least 24 months.
Swap rates in other markets fell as well. The five-year swap rate in Australian dollars decreased 4.5 basis points to 3.26 percent.
“It isn’t a local phenomenon, it’s international,” said Miguel Ramirez, a trader at Banco Bilbao Vizcaya Argentaria SA (BBVA) in Santiago. “The market started to doubt if all the measures announced by the Fed and the ECB would be effective. Pessimism has returned.”
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