The Chile peso plunged the most of the emerging-economy currencies after economic activity unexpectedly shrank 0.2 percent in March from February, while copper fell. This spurred bets that the central bank will move in to slash interest rates next week.
The peso plunged 1 percent to 568.15 a dollar at the close of trading in Santiago, its lowest level since March 19. Copper futures fell 0.6 percent to $3.0505 per pound. Copper is Chile’s most exported material.
Economists surveyed by Bloomberg had forecasted the economy to grow by 0.2 percent in March. The analysts also predict inflation to slow down to 0.2 percent last month, before the national statistics agency releases its report on May 8.
“We’re getting used to slower growth,” Cristian Donoso, a Santiago-based trader at Banchile Inversiones told Bloomberg. “If inflation in April is close to zero, that creates space for the central bank to lower the rate next week.”
The central bank is expected to make its decision concerning interest rates on May 15. It maintained its target lending rate at four percent in April and lowered the benchmark rate by 0.25 percentage point in February and March.
The Brazilian real also ended its three-day run of gains after the central bank slashed the amount of forex swap contracts that it will place for roll over, indicating it is gradually tapering its support of the currency.
The real plunged 0.3 percent to 2.2276 per dollar as of 10:26 a.m. in Sao Paulo after surging 1 percent last week to a weekly-high of 2.2214.
The central bank said on Friday that it will roll over 5,000 forex swap contracts that expire on June 2, down from 10,000 in April. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Yashu Gola at firstname.lastname@example.org