Chile peso could depreciate further following five-year nadir

miércoles 20 de agosto de 2014 18:35 GYT

By Antonio De la Jara

SANTIAGO Aug 20 (Reuters) - Chile's peso currency may fall even further, despite having sunk to an over five-year low this week, analysts said, as central bank monetary policy easing, market volatility and a recovering U.S. economy boost the value of the dollar.

The peso has slipped around 19 percent versus the dollar since January 2013 and ended Wednesday's trading session at 584.20 per dollar, down 0.63 percent.

An expansive monetary policy, with Chile's central bank cutting the benchmark interest rate by 150 basis points since October in a bid to reverse an economic slowdown, has made the peso less attractive and helped fuel its depreciation.

External factors have also played a part, said Pedro Tuesta, an economist with 4Cast in Washington, D.C.

"The peso will continue to depreciate if the economy doesn't recover," said Tuesta.

"Right now there's not much risk aversion and that's slowing the depreciation, but if risk aversion makes a comeback, owing to geopolitical factors or because data points to the U.S. Fed hiking interest rates before the third quarter 2015, then the peso could easily reach 600," he said.

That would be its lowest level since April 2009.

The peso's slide has helped fuel inflation, which topped the central bank's 2 to 4 percent target range and gave it reason to pause its easing cycle from April to June.   Continuación...