Chile peso ends down on strong dlr, govt comments

* Pinera vows to open capital accounts hit the peso

* Central bank allays talks of imminent intervention

* Chile not yet following Latam on direct intervention

SANTIAGO, Oct 26 (BestGrowthStock) – Chile’s peso (CLP=CL: ) closed 1
percent lower at 491.30/491.80 per U.S. dollar on Tuesday, its
weakest level in more than a month, on global dollar strength
and government plans to encourage capital outflows, analysts
said.

Santiago brokerage Bice Inversiones said the peso’s drop
was driven by President Sebastian Pinera’s comments after the
market closed on Monday on plans to relax limits on Chilean
investment abroad.

“The drop in external markets and a stronger dollar are
real fundamentals, but not enough to justify this drop in the
peso,” said a trader.

Pinera reiterated on Monday that his government was working
to increase the maximum limits on overseas investment for
pension funds and other institutional investors to offset the
impact on currency rates from incoming capital.

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Chile’s central bank has already lifted the limits on
investment abroad for local pension funds by as much as 20
percentage points over the past two years.

Even with greater freedom to invest abroad, it isn’t clear
how much more of the $138 billion under management would be
moved out of peso-denominated assets. Few of the funds in the
privately-managed pension system are now investing in foreign
assets to the maximum extent allowable.

“For now, we don’t see institutional players interested in
increasing their capital outflows,” said the Santiago-based BCI
brokerage in a daily report. “Despite that, we don’t rule out a
market reaction given the signaling effect of the government
reaffirming its commitment to a competitive exchange rate.”

Authorities could also change hedging requirements for
pension funds, as it did in January. That move triggered a
dramatic peso sell-off that weakened the currency nearly 8
percent in less than two weeks.

Central bank chief Jose De Gregorio said on Monday the peso
is comparable to other currencies in nominal appreciation and
that its strength has been lesser in “multilateral terms,”
allaying talk of an imminent intervention to tamper the peso’s
surge. [ID:nN25259357]

Chile has not yet traced the steps of other Latin American
nations that directly stepped into the foreign exchange market (Read more about international currency trading. )
to tamp down their surging currencies. Brazil for a second time
in October raised the tax on foreigners buying local bonds, and
Colombia’s central bank began buying pesos.

The Chilean peso has appreciated more than 11 percent since
the end of June.
(Reporting by Froilan Romero and Brad Haynes; Editing by
Padraic Cassidy)

Chile peso ends down on strong dlr, govt comments