Chile: Chilean peso weakens in August to multi-year low
August 25, 2015
In August, the Chilean peso depreciated to a new multi-year low against the U.S. dollar, continuing the generally weakening trend that began in May 2013. Moderating growth prospects for the Chilean economy mainly drove the downward trend. Chile’s important mining sector is struggling to regain momentum in the face of plunging 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.
The Chilean peso has depreciated further against the U.S. dollar lately and, on 25 August, it traded at 706.2 CLP per USD, which was the lowest value in many years. In fact, it was 6.9% weaker than on the same day of the previous month and 21.1% weaker on an annual basis. The peso’s multi-year low followed China’s market crash on 24 August, which triggered a depreciation of many emerging market currencies, with Chile being no exception. Concerns over a China slowdown and a weaker Chinese yuan are particularly critical for Chile, as China is the largest buyer of Chilean copper.
Since hitting the multi-year low, the peso appreciated slightly, trading at 690.7 CLP per USD on 10 September.