The dollar gains ground in Chile and concerns rise, USD/CLP approaches $1000

The dollar rises nearly $10 and closes above $975 amid renewed concerns about interest rate differentials with the US.

The price of the dollar surged on this ‘super Monday’ to hover around $975, as once again a context where the Chilean peso bears the brunt due to the diverging evolution of financial conditions between Chile and the United States prevails.

The local parity rose by $7.91 to reach $976.14 at the close of the currency market, according to Bloomberg quotes, staying at its highest levels of the session and making the Chilean peso the most depreciated emerging currency of the day. This is how the dollar regained some of the lost ground from its first weekly decline of the year.

The local exchange rate has climbed more than $90 so far this year, standing out globally.

Today’s advances came hand in hand with a rebound in borrowing costs in the US, where the yield on the two-year Treasury bond rose by 7.7 basis points (bp). Local inflation expectations among business owners continue to decrease, and that’s what has impacted the exchange rate.

The rise in market rates in the US also comes as a rebound after falling during the last week, and ahead of Federal Reserve Chairman Jerome Powell’s testimony before two legislative instances on Wednesday and Thursday.

After a year without economic growth, Chile could experience a rebound in 2024 and 2025, according to forecasts by the Organization for Economic Cooperation and Development (OECD).

It foresees that the outlook will improve due to the rise in real wages resulting from the decrease in inflation and the fall in interest rates, allowing Chileans to increase their consumption.

“Regarding the changes of this day compared to past sessions, it interrupted the flat streak of market quotations from the last four sessions. In the last week, the volatility was slightly lower than the accumulated volatility of the past year, so we can say that it is going through a period of greater stability in recent sessions.