Chile peso ends at year-to-date high on euro's gains vs dollar

The Chilean peso was stronger against the U.S. dollar Monday, climbing to a year-to-date high on the gains the euro posted in relation to the dollar and on the jump in U.S. stocks.

The peso ended at CLP528.60 to the dollar, compared to CLP530.50 Friday, after moving in a narrow range of CLP528.00 to CLP530.95.

The euro and other higher-yielding currencies strengthened in Monday morning trading after the U.S. reported a better than expected improvement in the manufacturing sector. The peso often moves in the same direction the common currency does against the dollar.

U.S. stocks, meanwhile, added to their earlier gains Monday after data showed pending home sales in September jumped by far more than expected, while construction spending in the month also unexpectedly surged and a measure on manufacturing came in at its highest point since April 2006. The Dow Jones Industrial Average was recently up 116 points, or 1.2% to 9829.

In its daily sales on behalf of the Finance Ministry, the central bank sold $40 million at a weighted average of CLP528.21 to the dollar. The monetary authority doesn't provide the information on which banks bid for dollar sales.

Earlier in the year, the Finance Ministry began a $4 billion sale, repatriated from one of its sovereign-wealth funds, in the local market. The ministry is selling the $4 billion, earmarked to finance this year's expected fiscal deficit, at a rate of $40 million a day.

So far, it has sold $3.44 billion. The dollar sales are scheduled to finish by the end of November.

In the local bond market, yields on the inflation-indexed Chilean central-bank bonds, or BCUs, ended sharply higher on banks' stop-loss orders and heavy bond sales from private pension fund managers as the market gears up for the release of consumer price index data later in the week, traders said.

Based on bond prices, the fixed-asset market expects the CPI to drop 0.1% in October from the previous month. If in line with expectations, 12-month inflation will remain in negative territory, according to analysts. The government's statistics institute will publish the CPI on Friday.

Yields on Chilean five-year BCUs ended at 2.59%, up from 2.49% Friday. The yield on 10-year BCUs ended at 3.13% up from 3.03% Friday.


Source: online.wsj.com

Publication date: 11/3/2009

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