UPDATE 1-Chile worried by peso strength; finmin, cbank to talk

Tue Jan 8, 2013 9:25am EST

* Strong economic growth, rates have strengthened peso
    * Gov't says worried about Chile competitiveness
    * Cbank intervened in 2011 to stem peso rise
    * Peso weakens following finance minister's comments


    By Felipe Iturrieta
    SANTIAGO, Jan 8 (Reuters) - Chile is worried about the
peso's strength and its effect on exports in the
commodities-dependent country, Finance Minister Felipe Larrain
said on Tuesday, adding he was to meet with the central bank
this week to analyze the currency's appreciation. 
    The peso, which has been boosted by Chile's robust economic
growth and healthy prices for top export copper, ranked
among the strongest foreign currency performers against the U.S.
dollar among 152 currencies tracked by Reuters in 2012.
 
    "The government is worried about the exchange rate's
competitiveness ... we're looking for various ways to better the
competitiveness of the export sector and we're cooperating via
fiscal policy to avoid further currency appreciation," Larrain
told reporters.
    "We're going to continue our very coordinated work with the
central bank, and we'll probably have a coordination meeting
this week," he added.
    Chile's peso was trading around 470 pesos per
dollar in morning Tuesday trade, but weakened to around 471.40
per dollar following Larrain's comments.
    "Larrain's comments may have triggered (the change), because
the peso was advancing and from one moment to another dollar
purchases began around 470 (pesos)," said Gloria Soto, trader
with FXCM Chile in Santiago.      
    It has appreciated roughly 8 percent this year.
      
    Analysts say that if the peso strengthens to around 465 per
dollar, the risk of the central bank intervening in the currency
market increases.
     Last month central bank president Rodrigo Vergara
reiterated that intervening in the local peso currency market
was a tool at the bank's disposal, but that if it hadn't
intervened so far it was because it hadn't been deemed
"necessary." 
    The central bank deployed a dollar-purchasing program in
2011 to curb peso strength after it appreciated to its highest
level in more than 2-1/2 years at 465.50 per dollar.
 
    The bank has kept rates steady since a surprise cut in
January 2012, as it weighs external risks against a buoyant
domestic economy. 
   Chile's small, export-dependent economy has mostly fared
better than expected despite slowing demand from top trade
partner China and fallout from the euro zone crisis, thanks to
robust domestic demand and investment.
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