Chilean Peso Strengthens on Central Bank Policy Bets

Tuesday, May 5, 2009


The Chilean currency continues its six-month bullish trend as copper price goes up and the national bank is expected to cut interest rates to improve the economy.

In the second semester of the past year, the Chilean currency had a severe devaluation when the global slump scenario was confirmed, but since December, and despite the current problematic economic situation in the country, the peso has been constantly gaining value against some of the most important currencies, such as the greenback and the pound. Chile has lowered its interest rate more than 5 percent since the beginning of the crisis, and it is expected to continue its rate-cut policy as an effort to revive the national economy, which for the moment, has a rising unemployment rate and a contracting industrial sector.

The interest rate policy in Chile will remain the same and according to analysts, as long as the national economy reports weak data, the rates will be cut systematically. In the next meeting, which will take place in the following week,policy makers are expected to set a 1.5 percent rate, a cut of 0.25 percent from the current one. The price of copper is another factor that has an important role for the Chilean currency, a significant rise on its price during the past months is helping the peso to climb, since Chile is a major exporter of this commodity.

The USD/CLP traded at 581.05 from a previous price of 585.05.

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