Chile: Chilean peso depreciates to multi-year low in November
December 4, 2015
The Chilean peso weakened to a multi-year low in November, continuing the overall depreciation trend that had been in place since May 2013. The peso was somewhat volatile in recent weeks and on 27 November the currency traded at 714.9 COP per USD, which was the weakest value in many years. The reading represented a 4.1% depreciation over the same day in October and a 19.1% depreciation in annual terms. Since the beginning of this year, the peso lost 18.0% of its value.
Ongoing weakness in the peso is 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 copper prices. In fact, copper prices fell to an over-six-year low in November. 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. Volatility in the peso largely reflects fluctuations in copper prices, speculation regarding the timing of the upcoming Fed interest rate hike and incoming data on the state of the Chinese economy, the major buyer of Chilean copper.