By Andrea Jaramillo
July 31 (Bloomberg) -- Chile's peso fell to a four-week low as investors pared bets for higher interest rates amid declining oil prices and economic slowing.
The currency weakened for a fourth day after the national statistics agency said in a report today that industrial output shrank 0.9 percent in June from a year earlier, as rising energy prices drove up costs. That was less than the median estimate of a 2.3 percent expansion in a Bloomberg survey of 14 economists.
Chile's peso dropped 0.3 percent to 509.3 per dollar at 10:51 a.m. in New York, from 507.62 yesterday. The currency touched 512.05, the weakest level since July 3.
The currency has appreciated 2.5 percent in the past 12 months on the widening difference between Chile's 7.25 percent target lending rate and the 2 percent U.S. benchmark and gains in copper, the nation's biggest export. The metal is up 8 percent in trading on the New York Mercantile Exchange in the past year, while oil has advanced 60 percent.
Banco de Chile raised its target lending rate this month by a half-percentage point to 7.25 percent, a nine-year high, in a bid to stem inflation. Policy makers next meet Aug. 14.
Annual inflation accelerated to 9.5 percent in June, the fastest since 1994 and more than double the upper end of the central bank's preferred range of 2 percent to 4 percent.
The yield for a basket of Chile's five-year peso bonds in inflation-linked currency units, known as unidades de fomento, fell 1 basis point, or 0.01 percentage point, to 2.88 percent, according to Bloomberg composite prices.
To contact the reporter on this story: Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net
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