Chilean stocks rally on banking, utilies, peso down

SANTIAGO, Nov 3 (Reuters) - Chile's stocks edged higher on Tuesday erasing earlier losses as investors bought oversold utility shares, while the peso ended lower as the dollar strengthened on its safe haven appeal.

The blue-chip IPSA .IPSA has tumbled nearly 4 percent in a little more than a week and looked to be headed for another negative session, but rallied to close slightly higher at 3,291.72. The all-market IGPA .IGPA closed flat at 15,542.31.

"The U.S. market opened higher while we were going down and at some point it inverted," said Allan Becker, a sales trader with CorpCapital brokerage.

Becker said that pension funds took advantage of gains in afternoon trading to divest shares in Chile and invest abroad.

Leading the IPSA higher was Banco Santander Chile STG.SN, the nation's largest private sector bank, up more than 3 percent at 28.130 pesos, while electricity generator Edelnor Chile END.SN surged 5 percent to close at 908.470 pesos.

At the same time, Chilean retailer La Polar LAP.SN, falling nearly 1 percent to 2662.10 pesos, while rival Ripley Corp RIP.SN closed 1 percent lower at 392.0 pesos.

Earlier in the day, Chile's peso CLP=CL weakened against the U.S. dollar a day after peaking at 1-year highs, punished by negative global bourses and a stronger dollar.

The peso fell 0.5 percent to 531.00/531.30 per dollar from Monday's close of 528.50/528.80.

The peso has gained 21 percent against the greenback after sliding 22.3 percent in 2008 during the worst of the financial crisis last year. (Writing by Aaron Nelsen; Editing by Diane Craft)