Chile: Dollar accelerates rise, approaching $990 in early afternoon.
The dollar rose by $6.78 to $987.97 in Chile, reaching session highs in early afternoon trading.
The dollar index climbed 0.6%, and the yield on the 10-year Treasury jumped 13 basis points, pressured by signals that move away expected interest rate cuts in the northern country.
On Monday, the dollar surged towards levels of $990 as financial conditions tightened in the United States due to the latest ISM survey of confidence in the manufacturing sector. The currency also incorporates into prices the indicators of personal spending and consumption that were published in the country during Good Friday.
The dollar rose by $6.78 to $987.97 in Chile, reaching session highs in early afternoon trading. Externally, the dollar index climbed 0.55% to 105.06 points – its highest level since November – and the yield on the 10-year Treasury jumped 13.1 basis points to 4.33%, after the ISM index surprised with an uptick into expansion territory (50 points).
Increased economic activity in the US is driving up rates along the yield curve. This further diminishes the spread with local rates, prompting dollar purchases in Chile. Although the rise in copper prices has been sustained, the impact of interest rates has been greater, which has been supported by comparables.
The price of the dollar, which recently completed a quarterly increase of nearly $100, had fallen early to a low of $972 on Monday, pushed down by positive business surveys from China and the solid February Imacec reported earlier. Comex copper rose 1.04% to $4.05 per pound, while traders tempered their expectations of a rate cut.
Despite the positive local data, the exchange rate ended up rising, mainly because interest rates abroad are rising significantly, primarily in response to the ISM survey data and especially its price indicator. This diminishes the chance that the Federal Reserve will cut rates soon.
Data on Tuesday showed that traders were decidedly positioning themselves in favor of the dollar in the US futures market. Today, market participants also incorporated data released during the Good Friday holiday in the US: the core deflator index – closely watched by the Fed – came in line with expectations, while personal spending indices exceeded forecasts.
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