Chile Peso Closes Weaker Amid US Recession Fears, Copper Slip

Aug 05, 2011 (Dow Jones Commodities News via Comtex) - Chile's peso ended weaker against the dollar Friday, amid intensifying fears about a double-dip U.S. recession and falling international copper prices.

The peso, however, cut its prior losses by about half after the euro surged versus the dollar on reports that Italy and the European Union agreed on reforms.

The local currency ended at CLP464.90 to the dollar, versus Thursday's close of CLP462.60, while trading in a range of CLP461.40 to CLP467.30.

As Chile is the world's premier copper producer, accounting for a third of global supply, the peso often takes trading cues from international copper prices.

Spot copper prices in London have lost an accumulated 5.6% since last Friday and closed lower at $4.17 a pound on Friday, according to Chilean state copper commission Cochilco.

"With copper prices falling that sharply, pressure has built on the peso to weaken," said Samuel Levy, trader with XTB Chile.

Also, as Chile's economy is highly export-dependent and nearly a third of the Andean nation's exports are bound for European ports, the peso often moves in the same direction as the euro does against the dollar.

The common currency bounced higher against the dollar on hopes the ECB could buy Italian government bonds, if Italy implements reforms.