Chile's peso CLP= rose 1 percent to a 17-month high in early trade on Wednesday on global dollar weakness, increasing the likelihood of threatened central bank intervention to tame the appreciation.

The peso rose 1.02 percent to 488.50/489.00 per U.S. dollar compared with Tuesday's close of 493.50/494.00. The peso later lost some ground but it has firmed around 30 percent against the dollar year-to-date and some analysts have said they expect the central bank to intervene if it hits 480 per dollar.

Despite recent gains the peso still has room to grow and align itself with other currencies, a local trader said.

The end of so-called carry trades has boosted the currency in recent weeks, prompting the central bank last week to warn of possible intervention in extreme circumstances.

Until recently, many carry trade investors borrowed in Chilean pesos at low interest rates and used the proceeds to buy dollars on the Chilean market to invest in Brazil, where rates are higher.

In closing these trades, investors must buy Chilean pesos to repay those peso-denominated loans.

Analysts say the central bank could start buying dollars to control the peso's surge, which has hurt the South American country's exporters.

The finance ministry has also said it is keeping a close eye on the currency.