Chile: The dollar falls at the beginning of the session below $940

Amid the strength of copper, main export of Chile, the rally of futures contracts for the red metal continues, with its price consolidating above $4 per pound.

The dollar declined at the opening of Friday below the $940 mark amid a strong surge in copper in international markets driven by fund purchases after Chinese smelters agreed to production cuts. Market participants are also digesting expectations regarding the interest rate differential between the United States and Chile.

In early trading, the dollar fell by $3.60 to $937.07, according to quotes. Internationally, the dollar index, which compares the US dollar to a basket of world currencies, rose by 0.03%, while copper futures climbed by 1.31% to $4.09 per pound.

This positive sentiment is reinforced by the announcements from copper refineries in China during the week, leading to an accumulated increase of approximately 5% in the red metal this week, breaking technical structures that suggest maintaining these sharp increases.

Thus, following a five-day positive copper rally and consolidating above $4 per pound, we might see a further correction in the dollar-peso parity, where the currency could appreciate to $934.

The price of copper holds immense significance for Chile due to the country’s heavy reliance on copper exports. As the world’s largest copper producer, accounting for a significant portion of global copper supply, Chile’s economy is closely tied to the performance of copper prices. Copper exports constitute a substantial portion of Chile’s GDP and government revenue, making fluctuations in copper prices pivotal to the country’s economic health.

When copper prices rise, Chile’s economy tends to thrive as increased revenues from exports bolster government finances and stimulate economic growth. Conversely, downturns in copper prices can have adverse effects on Chile’s economy, leading to reduced export earnings, fiscal challenges, and potentially slower economic growth.

ABOUT THE AUTHOR See More

Ignacio Teson

Economist and Financial Analyst

Ignacio Teson is an Economist and Financial Analyst. He has more than 7 years of experience in emerging markets. He worked as an analyst and market operator at brokerage firms in Argentina and Spain.

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