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Chile finance minister would support central bank intervention on peso

Chile's Finance Minister Felipe Larrain speaks during the annual meeting of the World Economic Forum (WEF) in Davos January 25, 2013. REUTER
Chile's Finance Minister Felipe Larrain speaks during the annual meeting of the World Economic Forum (WEF) in Davos January 25, 2013. REUTER

DAVOS, Switzerland (Reuters) - Chile's government would support any intervention by the country's independent central bank to weaken the strong peso, Finance Minister Felipe Larrain said on Saturday.

"The central bank may decide to intervene but it is their own decision ...if they do, we would certainly support them," Larrain told Reuters in a television interview at the World Economic Forum in Davos.

"We're trying to prevent further appreciation," he said.

The peso, which has been boosted by Chile's robust economic growth and healthy prices for top export copper, ranked among the strongest foreign currency performers against the U.S. dollar among 152 currencies tracked by Reuters in 2012.

Last month, central bank president Rodrigo Vergara reiterated that intervening in the local peso currency market was a tool at the bank's disposal, but that if it hadn't intervened so far it was because it hadn't been deemed necessary.

The central bank deployed a dollar-purchasing program in 2011 to curb peso strength after it appreciated to its highest level in more than 2-1/2 years at 465.50 per dollar.

Larrain said it was hard to counter the weight of U.S. quantitative easing: "Against this massive QE, we have a few tools but not many."

Chile's central bank has kept rates steady since a surprise cut in January 2012, as it weighs external risks against a buoyant domestic economy.

Due to robust domestic demand and investment, Chile's small, export-dependent economy has for the most part fared better than expected despite slowing demand from top trade partner China and fallout from the euro zone crisis.

Larrain added that the global economic picture was somewhat rosier at this year's Davos than in 2012.

"We're not yet out of the woods. The real economy still needs to undergo some tough work and the financial markets are helping but it's not to say this is over," Larrain said.

"It is the emerging markets that will continue pulling the world economy again in 2013."

(Reporting by Emma Thomasson; editing by Jason Neely)

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