Chile Peso, Rate Swap Yields Rise as Copper, Stocks Rally on China, Basel

Sep 14 (Bloomberg)--

Chile’s peso rebounded from its first weekly decline since July as Chinese industrial production boosted the outlook for copper, Chile’s biggest export, and regulators gave banks eight years to meet capital requirements.

The peso climbed 0.4 percent to 494.9 per U.S. dollar from 496.95 on Sept. 10. Chilean interest-rate swap yields rose to the highest in 19 months.

Copper gained for the first time in three days and emerging equities entered a bull market after China’s industrial production rose 13.9 percent in August from a year earlier, adding to speculation the global economy is strengthening. The Basel Committee on Banking Supervision reached a compromise yesterday that more than doubles capital requirements for banks while giving them until 2019 to meet so-called buffer requirements to withstand future stress.

"The peso is responding to international markets,” said Jorge Selaive, chief economist at Banco de Credito e Inversiones in Santiago. “The news on Basel III rules is causing the dollar to depreciate against the euro and that’s having an effect on the peso. Higher copper prices are also helping.”

The MSCI Emerging Market Index of stocks jumped 2.1 percent, taking the gauge’s rebound from its low on May 25 to 21 percent. Copper for delivery in December gained 2.1 percent to $3.4775 a pound on the Comex in New York.

Chile’s peso also strengthened after central bank President Jose De Gregorio said that the currency hasn’t “overshot” and reflects the economy’s strength.

There’s no need for policy makers to intervene in the currency market at this point, De Gregorio said in an interview yesterday in Basel. The peso has gained 8.6 percent in the past three months, the biggest advance among major Latin American currencies, as the economy expands at the fastest pace in five years and the central bank increases interest rates.

Chile’s one-year interest-rate swap rate rose 10 basis points, or 0.1 percentage point, to 4 percent, the highest level since Feb. 10, 2009. The two-year rate rose eight basis points to 4.36 percent, the highest since Jan. 30, 2009.