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The Dollar in Chile Ends Downward Trend as it Rises Again

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The Dollar in Chile Ends Downward Trend as it Rises Again

The dollar in Chile closed the day higher and ended its downward trend. The currency rose again after, before the falls, the United States currency showed a trend towards gains and reached its highest levels in more than a year.

In addition, the national currency ignored the fall of the dollar worldwide after US retail sales were weaker than expected in January.

At the close of the day, the dollar rose $6.1 compared to yesterday’s close on the Chilean Electronic Stock Exchange (Bec) and reached a value of $967.60. Thus, the currency ended a streak of two consecutive days of decline, where it accumulated a loss of $13.45.

However, in the first operations of the day, the currency sought to maintain its downward trend. The currency marked a low of $955.50 and then moderated its fall until registering gains. While, on the upper side, the currency reached a maximum of $969.45.

“Today the minutes of the last monetary policy meeting of the Central Bank of Chile were published, where it is implicitly implied that the issuing entity would continue to be aggressive in terms of future rate cuts, which pushed the exchange rate up,” commented from Renta4.

However, from Renta4, he also sees that, “we are in a period of adjustment of expectations, where after the dollar reached levels of around $970 and with this new scenario in which the Fed (Federal Reserve) would postpone until June The first reduction in the monetary policy rate would force the Central Bank of Chile to be more conservative and lower the MPR by only 50 or 75 bp in the next meeting.

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The Chilean peso also lost strength despite the fact that copper, one of the main supports of the national currency, recovered. Metals were supported by the decline in the dollar index, which had reached a three-month high this week. A weaker U.S. currency makes metals traded in the greenback less expensive for holders of other currencies.

In this way, the three-month value of copper rose 1.57% to US$3.76 per pound on the main futures exchange, Comex. Meanwhile, the spot value of copper rose 0.24% to US$3.69 a pound on the London Metal Exchange.

“Fears of the real estate crisis that China is going through keep investors cautious, since the Asian real estate sector is one of the largest demanders of the red metal. The market remains waiting to receive news about new stimuli that seek to reactivate the sector,” added Sebastián Castellanos, XTB Latam market strategist.

Meanwhile, the dollar around the world fell for the second straight session on Thursday, after a series of mixed data showed the US economy remains in a solid position, making it unlikely to prevent the Federal Reserve start cutting interest rates before June.

The dollar index, which measures the performance of the currency against a basket of six peers, lost 0.43% to 104.27 points.

In the United States, retail sales, excluding inflation, fell 0.8% in January, much less than the 0.1% forecast in a Reuters poll. The data was likely weighed down by winter storms.

“Bad weather often causes short-term declines in high-frequency economic indicators, such as retail sales and home construction, which are also likely to be weak when January data is released tomorrow,” said Bill Adams, chief economist at Comerica Bank.

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However, Thierry Albert Wizman, global rates and currencies strategist at Macquarie in New York, said the dollar’s pullback was likely temporary.

“As long as this divergence between the results of the United States and the rest of the world continues, there is no reason for the dollar’s momentum to reverse anytime soon,” he added.

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