MercoPress. South Atlantic News Agency

New record for the Chilean peso against the US dollar

The Chilean peso on Thursday reached its highest against the US dollar in five years, 550 pesos, with prospects of further appreciation given an expected rise in interest rates and the excellent performance of the economy.

The Chilean Central Bank is scheduled to meet next August 11 and analysts believe a 25 basis points increase is most certain given the inflationary spurt of July.

Economist Sergio Fernandez from Consultora Gemines said that the steady appreciation of the Chilean peso was expected given the strength of the local economy boosted by commodities prices and the performance of the US dollar in international markets.

"It's a situation which I believe we all expected for some time and which hadn't surprised us yet, in spite of the encouraging international scenario and the very large trade surplus Chile will achieve this year", said Mr. Fernandez.

"Besides growth prospects for 2006, together with the revaluation of the yuan (Chinese currency) have triggered a devaluation of the US dollar in international markets which has also reached Chile".

A stronger Chinese currency, and from other Asian countries, will have a positive effect for Chile's foreign trade.

"Thus, stronger currencies benefit our exports and mean more income for Chile. This is how the market interprets the situation and is reflected in a stronger Chilean peso", concluded economist Fernandez