I emailed HostelWorld to get their explanation and here's what they said:
You were charged $1.19 which was the equivalent of CLP600 on the day you booked. This is all correct but I see your point about the amount being converted back into local currency from USD. I agree that this is very confusing and I am going to have this removed. We are working back from the dollar amount to the CLP using sell/bid rates which will give a higher converted amount as the dollar has more demand than CLP. We are converting back to local currency for convenience but actually we cannot accurately reflect the exact amount in local currency as this will always be subject to conversion from USD (or GBP \ EUR as the case may be) by the card issuing bank at their own rate.
I just want to emphasize that you have not been overcharged. You were charged $1.19 the equivalent of CLP600 and we will remove our estimate of how the USD amount is converted back to local currency.
This explanation makes no sense to me (although the previous posters' did!) and it sounds like they are going to just remove the item on the page where it tells you how much you've "really" been charged.