Chile peso near 3-week low; retail shares rise

SANTIAGO, Dec 2 (Reuters) - Chile's peso CLP= fell 1.25 percent on Wednesday as traders squared positions ahead of the year-end amid expectations a sharp slide in the dollar is over, while stocks extended gains, boosted by retail and commodity stocks, traders said.

The peso CLP=CL fell to near three-week lows at 503.00/503.50 per U.S. dollar, compared to Tuesday's close of 496.70/497.20.

The peso is still up over 27 percent against the dollar year-to-date.

"Banks have been buying back some positions they had been selling as they have to adjust for the year-end," said a local trader who asked not to named. "That explains why the exchange rate has moved without taking into account external fundamentals which favor the peso."

Prices for copper, Chile's No. 1 export, touched 14-month highs in London on Wednesday and in New York hit their highest levels since August 2008 as fears about Dubai's debt problems continued to recede and upbeat data bolstered the recovery picture.

The dollar firmed against the yen and the euro. Elsewhere in the region, Mexico's peso firmed to a one-year high after JPMorgan raised its rating for Mexican stocks on bets strong U.S. growth will fuel an economic rebound there.

"The other reason for the peso's depreciation is the fact that the market believes the dollar has bottomed out against the euro and will likely rebound," the trader added.

Chile's blue chip IPSA share index .IPSA advanced for a fourth consecutive session on Wednesday, climbing 0.60 percent to close at 3,343.54 points, while the all-market .IGPA climbed 0.48 percent to 15,700.02 points.

"The market basically continued its positive trend, with rebounding volumes," said Rodrigo Andaur, head of research for FIT Corredores de Bolsa.