Chile: USD plunges following February’s CPI and US employment data

The Chilean market swap rates surged by up to 13 points.

The price of the dollar plummeted to $960 this Friday in Chile, after February’s CPI significantly surpassed market expectations, alleviating upward pressure from carry trade operations in recent sessions. In addition to this, the highly anticipated official US employment report figures validated the case for an official rate cut during 2024.

At the beginning of the afternoon, the local parity dropped by $22.93 to $959.6 on Bloomberg screens, reaching its lowest levels of the day. This extends the dollar’s distance from the levels of $990 reached in February, which were the highest in 17 months.

On the international front, the dollar index declined by 0.15% to lows since January, and the two-year Treasury bond eased by 2.6 basis points (bp) to its lowest interest rate since February. Meanwhile, Comex copper, the main export of Chile, retreated by 0.87% to $3.89 per pound.

The consumer price data has been key in today’s session. Chilean market swap rates surged by up to 13 basis points (bp) after it was revealed this morning that the CPI rose by 0.6% monthly in February.

The higher-than-expected CPI is surely putting cold water on the market regarding an acceleration in the pace of reductions of the Monetary Policy Rate (TPM).

Shortly after, the February non-farm payroll report was released in the US, where new payrolls surprised on the upside but were accompanied by downward revisions in previous months. Additionally, the unemployment rate unexpectedly rose to a two-year high, and average wages decelerated.

All of this is being well received by the American market and has led to retreats in the dollar globally. This effect is compounded by the CPI figure released this morning, which could lead the Central Bank to be less aggressive in cutting the TPM.