Chile peso hits 16-month high, hurts stock prices

SANTIAGO, Nov 23 (Reuters) - Chile's peso CLP=CL surged to a new 16-month high on Monday on a broadly weaker dollar and high copper prices, despite the specter of possible central bank intervention, while peso strength punished local exporter shares, analysts said.

The peso rose 1.77 percent to 492.50/492.80 per U.S. dollar, compared to Friday's close of 501.20/501.70. Last week the currency flirted with 17-month intraday highs.

The dollar slid against major currencies on Monday after investors sought assets with higher yields following a Federal Reserve official's comments that affirmed expectations U.S. interest rates would stay low for some time. For more see [ID:nN23375049].

The flight to riskier assets helped lift other currencies such as the Brazilian real (BRBY: 行情), which has gained about 35 percent so far this year and continued to strengthen on Monday. [ID:nN23240130]

"We opened the session with a strong peso appreciation, the product of an advance on global bourses as well as copper prices," a Chilean trader said.

COPPER HELPS PESO SURGE

Three-month copper MCU3 prices on the London Metal Exchange hit 14-month highs earlier on Monday, driven by the dollar's weakness and gains in other commodity markets, before paring gains. Stronger prices for copper, Chile's No.1 export, tend to boost the country's currency.

The end of a 42-day strike at BHP Billiton's (BHP.AX: 行情)(BLT.L: 行情) Spence copper mine in Chile partly helped limit expectations of further price gains for the metal.

Chilean Central Bank President Jose De Gregorio said last week that he did not rule out intervening in the country's foreign currency market to curb peso appreciation of around 30 percent against the dollar year-to-date.

The peso has been one of the best-performing emerging market currencies this year against a weaker U.S. dollar. Some analysts expect the central bank to intervene if the peso hits 480 per dollar.

The peso's appreciation also dragged Chile's blue-chip IPSA share index .IPSA 0.63 percent lower at 3,268.85 while the all-market IGPA .IGPA fell 0.50 percent to 15,431.21.

"When the exchange rate falls the market falls, when the exchange rate rises the market rises," said Cristina Acle, head of research for CorpResearch brokerage. "It seems to be related to profitability for foreign investors ... All stocks are falling so it seems to be a more generalized effect on exporters."

Conglomerate Copec COP.SN, the most heavily weighted share on the Santiago bourse, fell 2.32 percent to 7,106 pesos, while rival CMPC CAR.SN fell 1.79 percent to 18,199 pesos.

Chile-based regional energy group Enersis ENE.SN fell 1.57 percent to 188 pesos.