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Montevideo, March 29th 2024 - 08:58 UTC

 

 

Rapid recovery and strong copper demand sustain Chilean Peso appreciation

Wednesday, September 1st 2010 - 19:56 UTC
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The Chilean (copper) Peso has become a strong currency   The Chilean (copper) Peso has become a strong currency

The Chilean peso rose on the first day of September, --and now stands at 500 to the US dollar--, as accelerating manufacturing growth in China improved the outlook for Chile’s raw material exports, mainly copper.

The peso appreciated 0.5% to 500.38 per U.S. dollar from 502.75 on Tuesday. The Chilean currency increased 3.7% against the greenback during August and on a few days broke through the milestone 500 mark.

The Peso reflected promising prospects for copper following data on manufacturing in China which grew at a faster pace last month. The Chinese purchasing managers’ index rose to 51.7 from 51.2, exceeding forecasts, a Beijing backed report showed, while Australia’s economy expanded a faster-than-estimated 1.2% in the second quarter, according to government data released Wednesday.

“The peso is being affected by the opening of foreign markets,” said Eugenio Cortes, head of currency forwards at EuroAmerica Corredores de Bolsa SA in Santiago. “The manufacturing data from China and GDP from Australia are giving a boost to commodities and bourses, and all currencies are appreciating. Chile shouldn’t be the exception.”

Copper for delivery in December gained 2% to 3.4385 US dollars a pound on the Comex in New York. Copper for delivery in three months rose 1.4% to 7,546.25 US dollars a metric ton on the London Metal Exchange.

The Chilean economy is undergoing a strong domestic recovery and job creation period based on the rapid reconstruction from the devastating February earthquake. Industrial output jumped 3.3% in July from the previous year.

The currency has also gained support from expectations Chile's central bank will have to keep raising interest rates to control inflation in the post-earthquake boom.

However export sectors have warned about the impact on costs of a sustained appreciation of the currency. The 3.6% of August is equivalent of 18 Pesos and jumps to 43 Pesos when July is also considered. This is contrary to the tendency of the first half of the year when the US dollar appreciated 39 Chilean Pesos in exchange value.
 

Categories: Economy, Latin America.
Tags: Chile, copper, currency.

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