(Updates with bourse close)

By Alexia Vlahos

SANTIAGO, May 20 (Reuters) - Chilean shares fell on Wednesday, dragged down by losses on Wall Street, while the peso weakened due to strong dollar demand ahead of Thursday's national holiday.

The IPSA .IPSA blue-chip share index ended down 0.05 percent at 3,052.42 points, preliminary closing data showed, while the all-market IGPA index .IGPA closed up 0.09 percent higher 14,400,94 points. The IPSA has gained 28.5 percent since the start of the year.

"We totally followed the U.S. market," said Roberto Guzman, head of investment at the FIT Research brokerage in Santiago.

Wall Street's Dow Jones industrial average .DJI closed down 0.62 percent.

Soquimich SQM_pb.SN, Chile's leading exporter of fertilizer and the world's biggest producer of iodine and lithium, rose 1.81 percent to 20,675 pesos per share.

Shares in retailer Falabella FAL.SN fell 0.77 percent to 2,177.60 pesos a shares, while Steelmaker CAP CAP.SN rose 2.88 percent to 11,904 pesos.

The Chilean peso CLP=CL closed 0.13 percent weaker at 559.70/560.20 per U.S. dollar compared with Tuesday's close of 559.00/559.50.