Recently, the US dollar has surged in Chile, reaching CLP$959.63, influenced by a strong global US dollar and a revealing US job report.
This rise reflects uncertainties around US monetary policies and the effects of local interest rate cuts and copper price fluctuations.
Consequently, the Chilean peso has become the weakest among Latin America‘s six largest economies this year, as per Bloomberg’s data.
Renato Campos from Hantec Markets highlighted the dollar reaching new annual highs, unseen since October 2022.
Back then, political factors in Chile and a globally strong dollar contributed to its ascent.
Peso hits CLP$950.19 vs. USD last Friday, weakened by strong US employment report, reducing expectations for rate cuts.
Meanwhile, the Federal Reserve has maintained interest rates steady, ranging between 5.25% and 5.5%.
In Chile, the central bank reduced borrowing costs to 7.25%, responding to the lowest inflation rate since June 2021 at 3.9%.
Rate cut and US-Chile interest gap prompt capital outflows, strengthening the dollar against the peso.
Additionally, copper prices, significantly impacting Chile’s economy, have been influenced by China’s policies to boost its real estate sector.
Currently, copper stands at US$3.778 per pound, with a slight decrease indicated.
Capitaria noted that China’s recent downturns have pressed copper prices, potentially favoring further dollar gains in Chile.
Campos warned that without positive news from China, copper’s decline could worsen, pushing the peso to further lows, possibly reaching CLP$990 per dollar.
In 2024, the peso will have depreciated by -8.25%, more than other regional currencies.
This contrasts sharply with 2023, showcasing the dollar’s strengthening trend and the peso’s depreciation challenges.
Predictions by Bloomberg suggest the dollar could stabilize at CLP$850 by year-end, indicating a cautious outlook for the Chilean economy.