Intervention watch
DJ Chile Peso Ends Weaker On Brazil Forex Intervention
12/06/2004
Dow Jones News Services
SANTIAGO (Dow Jones)--The Chilean peso closed weaker against the dollar Monday, in reaction to the Brazilian central bank's intervention in the currency market, according to traders.
The currency closed at CLP581.75 to the dollar, weaker than its CLP579.60 close Friday, after trading in a broad CLP577.50-583.20 range.
The peso opened stronger, at CLP579.00, and quickly weakened on a European bank's dollar purchases. It then continued sliding after the Brazilian monetary authority made a "modest," by traders' estimates, greenback buy.
The Andean currency often trades in sync with its Brazilian counterpart. The real also often plays a key role in peso trading as the Brazilian currency is an important short-term indicator of investor confidence in Latin America.
In addition, the peso reacted to copper prices falling for the fifth-consecutive session. Chile is world's largest copper producer, accounting for 30% of global output. Falling copper prices reduce export revenue inflows to the local currency market, traders said.
In the local bond market, the benchmark peso-denominated, inflation-indexed, eight-year PRC closed at a yield of 2.76%, compared with 2.67% Friday.
Rates rose in line with market expectations of a central bank 25-basis-point interest rate hike, to 2.50%, at its monthly monetary policy meeting scheduled for Thursday.
The 20-year PRC closed at a yield of 3.32%, compared with 3.30% Friday.
