Chile: Chilean peso appreciates slightly but remains weak in October
October 7, 2015
The Chilean peso was volatile in September and at the beginning of October and, it remained weak overall against the U.S. dollar. After the peso hit a multi-year low against the greenback on 25 August, the currency gained some value in the first weeks of September, but weakened again toward the end of the month. On 29 September, the peso traded at 704.1 CLP per USD, which was almost as weak as August’s multi-year low. However, the currency appreciated slightly at the outset of October. On 7 October, the peso traded at 680.8 CLP per USD, which was 1.9% stronger than on the same day in September. Nonetheless, the reading still represents a 14.2% decrease in annual terms. Since the beginning of the year, the peso has lost 12.2% of its value.
Ongoing weakness in the peso and the overall depreciating trend which began in May 2013 are mainly the result of moderating growth prospects for the Chilean economy. Chile’s important mining sector is struggling to regain momentum in the face of depressed prices. In addition, the depreciation of the peso also reflects that the U.S. dollar is gaining strength on the back of an improving U.S. economy, growing risk aversion regarding emerging market currencies and expectations that the U.S. Federal Reserve may soon start hiking interest rates.
Recent volatility in the peso largely reflects uncertainty and speculation regarding the timing of the upcoming Fed interest rate hike, fluctuations in copper prices and new data on the state of the Chinese economy, the major buyer of Chilean copper. At the beginning of October, the peso gained some strength as weaker-than-expected U.S. jobs data point to the U.S. interest rate hike coming later than expected . In addition, copper prices recently recovered slightly, which was partly due to major producers’ decision to cut back production.