Chilean Peso Weakens Past 970 as IPSA Tumbles 1.3% Before Rate Decision

Chilean markets retreated Monday as the S&P IPSA index fell 1.32% to close at 9,089.29 points while the peso weakened to 970.87 per dollar ahead of Tuesday’s central bank meeting.

The dual decline reflected profit-taking and positioning before the anticipated interest rate decision. The IPSA’s 121-point drop marked its steepest decline in three weeks, erasing previous session gains amid broad selling pressure.

Trading volume reached normal levels as the index broke below the 9,200 support zone that had held throughout early September. The broader IGPA index fell between 0.54% and 1.22% depending on calculation methodology.

The peso closed at 970.87 per dollar according to official data, weakening from 966.08 the previous session as the currency tested key resistance levels.

The move occurred despite a weaker dollar index, which fell 0.14% to 97.32 on growing Federal Reserve rate cut expectations. Markets now price an 89% probability of a September Fed cut, with some positioning for a larger 50 basis point move.

Technical indicators on daily charts show the IPSA breaking below short-term moving averages while the RSI dropped from overbought territory to 63.68.

Volume patterns suggested institutional selling rather than retail panic, with foreign investors reducing positions in banking and mining stocks. The peso’s break above 970 puts it near levels that have previously capped rallies.

Copper prices provided modest support, rising 0.27% to $4.51 per pound on London markets amid supply concerns following the El Teniente mine suspension in Chile.

The metal’s resilience helped limit peso weakness, though concerns about Chinese demand growth and potential US tariff impacts continue weighing on the outlook.

Chile’s central bank meets Tuesday with markets pricing a 75% probability of a 25 basis point cut to 4.50%. Recent inflation data showing a 4% annual rate provides policymakers room to ease, though August consumer prices held steady contrary to expectations for further declines.

The current rate of 4.75% was last adjusted in July when the bank delivered its first cut of 2025. Market participants cited positioning ahead of the rate decision and global uncertainty as key factors behind Monday’s retreat.

The peso’s weakness occurred despite Chile maintaining its status as Latin America’s fastest-growing tourism market and progress on lithium sector agreements with international partners.

The Global Liquidity Index tracked by market indicators showed continued volatility, reflecting uncertain risk appetite across emerging markets.

Foreign ETF flows turned negative with approximately 12 billion pesos in outflows as investors reduced exposure before key policy announcements.

Trading patterns suggest markets await clarity from Tuesday’s central bank decision and upcoming US inflation data for directional guidance. The peso faces near-term resistance at current levels while the IPSA requires consolidation above 9,000 points to prevent further declines.