Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
December 14, 2024 –
“The Chilean peso is under significant negative pressure at the end of the week, marking its fourth consecutive day of depreciation. In this session, the USD/CLP exchange rate shows a 0.8% increase, positioning the Chilean currency around 990 pesos per dollar, near its lowest level so far this year and in a zone that has served as a key support level throughout 2024.
This weakness is mainly attributed to the decline in copper prices, which fell by 1.3% during the session due to disappointing data from the Chinese economy, the world’s largest consumer of the metal. While previous stimulus announcements from the Chinese government temporarily boosted copper prices, the lack of concrete results in reviving industrial demand has reignited concerns about the economic health of the Asian giant.
Additionally, the strength of the US dollar and rising US Treasury yields have also negatively impacted the Chilean peso. Over the week, the 10-year bond yields surpassed 4.35%, reflecting expectations of a less aggressive Federal Reserve regarding rate cuts in 2025 following inflation data that have exceeded expectations.
This scenario places the Chilean peso in a challenging position. With significant interest rate cuts this year and a 5% target for the upcoming week, the rate differential remains limited against the dollar, keeping pressure on the CLP.In conclusion, the CLP faces an adverse environment characterized by a combination of external and internal factors. The development of copper prices, the Federal Reserve’s monetary policy, and the future actions of the Central Bank of Chile will be critical in determining the currency’s path in the short and medium term.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone