Chile Peso Drops on Central Bank Plan to Boost Foreign Reserves

The Central Bank of Chile logo is seen on a lamppost outside the offices in downtown Santiago, Chile, on Thursday, June 28, 2018. Chile's government has a tough task -- passing a tax reform that is fiscally neutral, popular with the business community and acceptable to an opposition that pushed through corporate tax increases just four years ago.
The Central Bank of Chile logo is seen on a lamppost outside the offices in downtown Santiago, Chile, on Thursday, June 28, 2018. Chile's government has a tough task -- passing a tax reform that is fiscally neutral, popular with the business community and acceptable to an opposition that pushed through corporate tax increases just four years ago.

(Bloomberg) -- Chile’s peso tumbled at the open Wednesday, dropping more than any other emerging-market currency, after the central bank announced plans to boost its international reserves.

The peso weakened 2.1% to 742.26 to the dollar as of 8:55 a.m. in Santiago. The currency hasn’t dropped that much in a day since June 18 last year.

The central bank said in a statement that it will start to replenish its reserves next week through daily purchases of $40 million at competitive auctions. The bank will buy a total of $12 billion ahead of the end of the International Monetary Fund’s Flexible Credit Line in May 2022. That will more than compensate for the $2.55 billion it spent in an intervention plan between December 2019 and January 2020.

The plan is to increase reserves to 18% of gross domestic product, the bank said.