SANTIAGO, April 8 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
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.