UPDATE 1-Chile peso ends near 2011 intervention levels

Mon Apr 8, 2013 1:22pm EDT

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SANTIAGO, April 8 (Reuters) - Chile's peso ended at more than a year-and-a-half high on Monday, nearing levels that prompted the central bank to launch a dollar-purchasing program in early 2011 to stem the currency's strength.

The peso, which firmed 0.41 percent on Monday to bid at 466.90 per dollar, is up 2.53 percent so far in 2013.

The peso, which has been buoyed by Chile's robust economy, an attractive rate differential and healthy prices for top export copper, was one of the strongest performers against the U.S. dollar among 152 currencies tracked by Reuters after appreciating 8.48 percent last year.

Exporters, especially fruit producers, in trade-intensive Chile have been walloped by the peso's appreciation.

Chile's central bank deployed a dollar-purchasing program in 2011, increasing its foreign reserves by $12 billion, to curb peso strength after it appreciated to its highest level in more than 2-1/2 years at 465.50 per dollar.

"Last week the central bank suggested that it was comfortable with the real exchange rate's current levels, which triggered a supply (of dollars being sold) at the local level, especially by foreign brokerages. In other words they are doing carry-trade," a trader told Reuters.

The central bank said last week the peso's real exchange rate had appreciated slightly and was on the low end of levels consistent with its long-term fundamentals. The real exchange rate is a measure used by the central bank, in part to gauge the competitiveness of Chilean exports.

Bank President Rodrigo Vergara said a currency market intervention was one of the tools at the bank's disposal, but highlighted the costs associated with using that measure.

Analysts have said the central bank could raise its key interest rate to rein in buoyant domestic demand sooner than forecast, but it may have to preface the hike with a currency intervention to avoid further strengthening the peso.

Over the weekend, bank board member Enrique Marshall said the bank will act if the local economy maintains dynamism "above what is reasonable," and interest rates are the best instrument at the entity's disposal.

Ebullient domestic demand, an economy nearing full employment and heavy investment have protected the world No.1 copper producer from a sharp slowdown on the back of global woes, but many analysts are now worried about overheating.

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