Chile peso sharply lower, stocks pare gains on oil

SANTIAGO, July 30 (Reuters) - Chile's peso closed sharply lower on Wednesday amid U.S. dollar gains and expectations of a U.S. interest rate hike, dealers said, while stocks pared early gains after oil prices rebounded from 12-week lows.

The peso CHILJ CLP=CL, which has bounced around since the beginning of the year pressured upward by higher benchmark rates and downward by central bank intervention, fell 1.88 percent to close at 506.30/506.80 per dollar.

Any increase in official U.S. interest rates would narrow the breach with Chile's benchmark rates.

The peso has depreciated 15.1 percent since the central bank introduced an $8 billion intervention program to curb gains earlier this year and is down 1.68 percent year to date.

The blue-chip IPSA index .IPSA was 1.13 percent higher at 2,980 in early afternoon trade while the all-market IGPA .IGPA advanced 0.99 percent to 14,204, with both indexes paring stronger gains made earlier in the morning.

On the bourse shares of fertilizer, lithium and iodine producer Soquimich SQM_pb.SN were up 8.38 percent to 20,700 pesos per share.

LAN LAN.SN (LFL.N: Quote, Profile, Research), Chile's dominant airline, was up 1.79 percent at 5,800 pesos per share a day after it bucked market expectations with a second-quarter net profit rise of 10.7 percent from a year earlier.

Analysts had expected a 7.6 percent drop, betting surging oil prices would offset the carrier's revenue growth and fuel hedge.

Traders said other Chilean stocks were also propelled by favorable expectations for upcoming corporate reports this week and next.