Chile: Chilean peso remains weak in February
February 11, 2016
The Chilean peso remained weak in February, despite a modest appreciation from January’s multi-year low. The peso has been on an overall depreciation trend since May 2013 and weakened to a multi-year low at the beginning of January. While the peso has strengthened slightly thereafter, it remains weak. On 10 February, the currency traded at 712.9 CLP per USD, which represented a 2.0% appreciation over the same day in January but a 13.8% depreciation in annual terms.
Ongoing weakness in the peso is mainly the result of lower growth prospects for the Chilean economy and struggles in the country’s important mining sector. The Chilean peso is strongly correlated with the price of copper, which is the country’s top export. Slowing demand from China—the largest buyer of Chile’s copper—amid a restructuring of China’s economy is the main reason behind a prolonged fall in copper prices and a major driver of the peso’s depreciation. In fact, copper prices dropped to an over-six-year low in January. 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 and growing risk aversion regarding emerging market currencies.