Chile stocks flirt with lifetime highs, peso dips

* Leading shares near lifetime highs

* Peso ends lower as dollar gains abroad

By Alonso Soto and Froilan Romero

SANTIAGO, Dec 18 (Reuters) - Chile's leading share index closed within a hair's breadth of all-time highs on Friday, led by gains in utility and retail stocks, while the peso fell as the dollar firmed abroad on signs of improvement in the U.S. economy, traders said.

Chile's blue-chip IPSA index .IPSA rose 0.47 percent to 3,499.07 points in the last minutes of trading after being mostly flat during the day, while the all-market .IGPA ended up 0.4 percent at 16,283.78 points.

The IPSA, which is up 47 percent in the year-to-date, is a shade away from its record closing high of 3,499.50 points, set on July 3, 2007. The IPSA hit an all-time intraday high of 3,512.19 points, on Oct. 26, 2007.

"We have seen some gains in the electricity sector," said Alexis Olivares, an analyst with BBVA Research. "The electricity sector still has room to grow."

Shares in Chile-based regional energy group Enersis ENE.SN rose 1.28 percent to end at 212 pesos.

Retailer Cencosud CEN.SN, one of Latin America's largest retailers, rose 0.20 percent to 1,695 pesos per share, while competitor La Polar LAP.SN rose 1.62 percent to 2,835 pesos.

Industrial conglomerate Copec COP.SN, one of the world's biggest wood pulp exporters and the most heavily-weighted stock on the local exchange, rose 0.65 percent to 7,550 pesos.

Chile's peso weakened on Friday as the U.S. dollar strengthened broadly on signs of improvement of the U.S. economy, while the country's leading share index ended higher led by utility and retail shares.

The peso CLP=CL weakened 0.69 percent to close at 503.80/504.30 per U.S. dollar, compared to Thursday's close of 500.30/500.80. The peso is up around 27 percent against the dollar so far in the year-to-date.

"All emerging markets currencies are falling, which reflects the dollar appreciation in major markets," a local trader said.

The dollar rose broadly on Friday and was on track for its biggest weekly gain against the euro since April as investors who sold the U.S. currency aggressively in 2009 bought it back as year-end approached. For details, see [ID:nN18235960]

Signs of improvement in the U.S. economy have helped the dollar in recent days, as did the Federal Reserve's pledge this week to wind down most emergency lending by February, lifting hopes of a more robust U.S. recovery in 2010.

The dollar also attracted safe-haven inflows after Iraq said Iranian troops had crossed into its territory and raised an Iranian flag at a disputed oil field -- a report Tehran denied.

The dollar often rallies when investors move their money from riskier assets, including investments in emerging market currencies, to the safe-haven greenback. Other major currencies in Latin America such as the Mexican peso MXN= and the Brazilian real BRBY booked losses on the stronger dollar this week.

Central Bank President Jose De Gregorio on Friday issued a fresh warning of intervention to curb the peso's sharp gains this year, saying the bank did not rule out taking measures if it sees "significant imbalances." [ID:nN18160138]

The peso hit 17-month highs in late November, and the bank has fired several salvos of verbal intervention since.