The dollar price extended its gains this Friday, and reached a new high in more than a year, in line with the decline in copper, on a day on which, however, there was activity in relation to important data for the markets.
The US currency rose $3.83 to $970.3, its highest level since Oct. 24, 2022, when it was $987, according to data from the Chilean Electronic Stock Exchange.
With this, the currency has gained $24 so far this month and is projected to rise by $88 during 2024. Today, Friday, the currency oscillated between a minimum of $963.51 and a maximum of $974.00.
“The price of the dollar continued to rise today, reaching a new maximum not seen since October 2022. Expectations of a rate cut by the Central Bank of Chile and interest rates in the United States There is less probability of a decrease. “The main factor in the rise of the North American currency in our country is to support the prospects of a greater outflow of foreign currencies due to the carry trade,” said Ricardo Bustamante, deputy manager of studies at Capitalia.
On the other hand, copper futures are seeing more declines, reaching their lowest value since November last year, which has generated more strength for the dollar in Chile, he said, noting That it is the main export product …
In this sense, he said that “if the current fundamentals hold up, the dollar could absolutely go in search of $1,000, although we should pay attention to the evolution of the real exchange rate which will allow some exchange intervention by the Central Bank. Can encourage.”
The rate differential with the United States, the weakness of the Chinese economy and its impact on the decline in the price of copper, as well as the less liquid market due to it being February and foreign bets against the peso have affected the exchange rate. It has increased by more than $80 so far this year and economists consulted by Pulso suggest that if this rise continues, the Central Bank may take action.
Copper prices have fallen sharply in recent days, with weak economic data from China, the metal’s biggest consumer, playing a key role in the performance of the red metal, Chile’s main export product.
The spot price of the metal on the London Metal Exchange fell 1.35% to US$3.67 per pound, its lowest level since November 14, 2023, when it closed at US$3.665 per pound.
Thus, it had the biggest daily decline since December 5, 2023, when it declined by 1.88% and with this, it has lost 4.54% so far this year. Meanwhile, three-month futures on the London Metal Exchange fell 0.42% to US$3.69 per pound.
The dollar index, which measures the currency’s performance against a basket of six liquid currencies including the euro, fell 0.09% to $103.93.
The rate difference occurs because the Central Bank in Chile is cutting monetary policy rates (MPR), while in the United States they remain high, leaving investors looking for returns in the world’s largest economy, Chile. Like countries are withdrawing dollars and devaluing them. local currency.
However, BCI Estudios reported in its weekly report that “even when recognizing the depreciated Chilean peso on the monetary side, there is a significant misalignment compared to the exchange rate predicted by its explanatory variables.”
In this sense, he said that the price of copper, the price of oil, the risk premium, among other variables, do not point to an exchange rate as high as the current one.
“Therefore, the current exchange rate has noted a deviation between $80 and $100, corresponding to its explanatory variables. In recent years, such disturbances have occurred only a few times: in December 2019 and in July 2022, both of which excessive depreciation processes ended in Central Bank intervention. However, unlike those episodes, this time it is an external event that has induced an increase in the exchange rate, which is why, for now, a low probability of intervention by the monetary authority is recognized.”
For this reason, he said that including a central bank that will cut its monetary policy rate faster than expected, he estimates that the exchange rate will be around US$880 by the end of the year.
The key assumption recognizes reduced external pressure, as the United States Federal Reserve begins a cycle of interest rate cuts, however, the report cautioned, risks to the exchange rate assumption are tilted to the upside.