MercoPress. South Atlantic News Agency

Chilean peso below the 600 benchmark.

The Chilean peso finished this Thursday below the 600 benchmark against the US dollar in Santiago money markets.

The US dollar closed at 598 pesos, the strongest since April 2001, confirming the steady appreciation of the Chilean currency.

A year ago in the midst of the imminence of war in Iraq and political turbulence in Brazil the US dollar reached 710 Chilean pesos.

However the Chilean peso, spurred by good local economic prospects and stronger overseas demand, has since gradually recovered to the chagrin of the export industries that face a leap in peso denominated costs.

Early in the day Chilean Central Bank Councillor Jorge Desormeaux tried to downplay the magnitude of the drop of the US dollar.

The strong appreciation of the Chilean peso "is no tragedy and numbers should not overly concern export industries" said Mr. Desormeaux adding that in the coming months the retail prices index could actually remain flat or become negative, "well inside the 2 to 4% inflation range estimate for the next 24 months".

Transactions in Santiago money markets reached 370 million US dollars, 84 million less than the previous day.

This Thursday also the Chilean Central Bank claiming that "annual inflation and subjacent inflation, excluding some volatile prices, are below 2%, with the possibility of negative indexes in the first half of 2004", announced a 50 points in the basic interest rate from 2,75% to 2,25%.

The Bank's interest rate monetary policy is "coherent with risk contention keeping inflation projections for the usual 24 months horizon policy below 3%". However the Central Bank identifies as a relevant risk the fact that inflation could be "undesirably low for too long a period".