MercoPress. South Atlantic News Agency

Chilean main banker cautions on low US dollar speculation

BC president Jose De Gregorio

Chile's Central Bank (BC) president Jose De Gregorio cautioned this week against speculation on the low US dollar, warning that, when the currency begins to regain value, such actions could cause significant financial losses.

The US dollar has fallen more than 100 Chilean pesos in the past twelve months. In early March, the greenback reached a nadir after loosing ground against the Chilean currency for twelve straight days. Meanwhile, at the end of the day Monday, one US dollars was worth 438 Chilean pesos, marking one of the lowest exchange rates since 1997. Gregorio, who made the comments Monday while attending a conference at Argentina's Universidad Torcuato Di Tella, acknowledged financial weakness in the U.S. economy, particularly in the housing market. Still, he said that other factors, mainly speculation, could be artificially hastening the U.S. dollar's slide against the Chilean peso. "The rapid appreciation of the Chilean peso is worrying because some sectors could possibly be overreacting to the changes. When the dollar rebounds, it could cause copious losses for those who had engaged in speculation." de Gregorio said. He noted that such actions make things more difficult to implement appropriate monetary policies, noting that "overreactions could make it more difficult to maintain sound macroeconomic policies?those tendencies can also generate distortions in key economic indicators and threaten a country's financial stability." De Gregorio made special reference to inflation, saying that, if analyzed correctly, the appreciation of the peso could be used to moderate Chile's high inflation. In February, the country's 12 month inflation rate reached 8.1%, the highest since 1996. Chilean Finance Minister Andrés Velasco has also claimed that speculation has pushed the value of the U.S. dollar lower. On Tuesday, the value of the U.S. dollar had fallen to 432 Chilean pesos. The Santiago Times