December 28, 2012 / 5:40 PM / 5 years ago

WRAPUP 1-Chile peso gains sharply in 2012, stocks up mildly

SANTIAGO, Dec 28 (Reuters) - Chile’s peso closed 0.23 percent stronger against the U.S. dollar on Friday at 478.70, bringing the currency’s accumulated gains versus the greenback this year to 8.48 percent.

The peso, which has been boosted by Chile’s robust economic growth and healthy prices for top export copper, ranks among the strongest foreign currency performers against the dollar among 152 currencies tracked by Reuters.

“We believe that the factors that have boosted the peso are going to continue in 2013, considering average copper prices above $3.60 per pound, monetary stimulus and the local economy’s strength,” said Sergio Tricio, head of research at Forex Chile.

A wide interest rate spread compared to developed nations, with the local key rate anchored at 5.0 percent since January, and the upward revision by Standard & Poor’s of Chile’s sovereign credit rating, will continue to make the South American nation an attractive destination for investments, Tricio added.

Analysts say that if the peso strengthens to around 465 per dollar, the risk of the central bank intervening in the currency market increases.

Earlier this 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.”

He added that large flows of short-term capital are not flooding into Chile in the wake of the U.S. Federal Reserve’s announcement of a fresh round of monetary stimulus.

The central bank deployed a dollar-purchasing program last year, which lasted through December, to curb peso strength after it appreciated to its highest level in more than 2-1/2 years at 465.50 per dollar.


Chile’s blue-chip IPSA stock index closed flat on Friday as investors moved around their portfolios in a high-volume, pre-holiday session, leaving its accumulated gain in 2012 at 2.9 percent.

The country’s financial markets will be closed on Monday, New Year’s Eve.

Disappointing corporate earnings, due to high energy costs, rising wages and a corporate tax hike, and a slew of capital increases weighed on the IPSA during the year. The local index would have ended in negative territory if not for a 3.8 percent increase in December.

“Next year we see the IPSA remaining under pressure until April or May on a number of factors, including uncertainty surrounding the U.S. fiscal cliff, stiff energy costs and ongoing capital increases,” said Alfredo Parra, analyst at Santiago-based brokerage EuroAmerica.

Earlier this month, shareholders of Chilean energy group Enersis approved a controversial planned capital increase of nearly $6 billion, the biggest in the country’s history.

A low base of comparison for corporate earnings, though, will help fuel a 10 percent to 12 percent rise in IPSA for all of 2013, Parra added.

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