International investors reduced bets against the Chilean peso by the most in eight weeks after the central bank said last week the currency had appreciated “slightly,” easing concern it will try to slow its advance.
The currency gained 0.4 percent to 470.72 pesos per dollar at 10:31 a.m. in Santiago. The peso has risen 1.7 percent this year, the most among Latin American currencies tracked by Bloomberg. Offshore investors in the forwards market cut their short peso position by $811 million to a 16-month low of $1.8 billion on Jan. 18, according to data published today.
“Offshore investors are less concerned, and they’re taking positions based on that opinion,” Alejandro Araya, a trader at Banco Santander Chile in Santiago, said by telephone. “Locals are a bit more nervous whereas the offshore players have more faith in the good judgment of the central bank. The economic fundamentals that support the peso are still present.”
The central bank mentioned the exchange rate for the second straight month in a policy statement released Jan. 17, saying the peso had appreciated only “slightly.” Policy makers held the target lending rate at 5 percent for a 12th straight month.
The currency has traded in a range of 469 to 476.5 per dollar over the past two weeks as concern the central bank will intervene to prevent gains overshadowed confidence in emerging markets.
The central bank probably won’t step into the currency market at 470 per U.S. dollar, Felipe Hernandez, a strategist at Royal Bank of Scotland Group Plc in Stamford, Connecticut, wrote today in a note to clients. Intervention is more probable at 450 to 460 pesos per U.S. dollar, according to Hernandez.
“We expect the peso to continue under strengthening pressure from favorable terms of trade and robust capital inflows, and the central bank to remain on the sidelines,” Hernandez wrote.
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