Chile's peso seen weakening later this year - BBVA

SANTIAGO, June 25 (Reuters) - Chile's strong peso surge in the last few weeks is likely due to an overreaction by the market and the currency is seen weakening later this year, BBVA bank said on Thursday.

Chile's peso firmed to a new nine-month high on Thursday, strengthening on a new government plan to repatriate and convert $4 billion in savings into pesos.

Chile's peso CLP=CL closed 0.43 percent firmer at 529.70/530.00 per U.S. dollar, compared with Wednesday's close at 532.00/532.50.

BBVA Chile said the peso is likely to weaken because of the price of Chile's export mainstay, copper, whose annual 2009 average price it sees at $1.78 per pound, and expected "huaso bonds" to be issued in pesos by foreign companies in the Chilean market.

"We understand the rise in the peso was basically an overreaction and therefore will likely turn around toward levels at 550 in the future and will close at 560 by the end of the year," Alejandro Puente, head economist with BBVA Chile bank, told reporters.

Last week, the government announced the central bank will sell dollars for pesos on behalf of the government in $40 million installments starting in July, after it finished its $50 million daily auction on Tuesday for the month.

The peso is now up 21.01 percent against the dollar year-to-date, after slumping 22.3 percent in 2008. (Reporting by Rodrigo Martinez; Writing by Alexia Vlahos; Editing by James Dalgleish)