After I highlighted in my previous column the news of the the of lower rates in Chile, which wouldwhich would push the the exchange rate to the 850 zone, we see how today the situation is different in the sense that we are at 900, a dollar that has appreciated in the world, putting the previous view on hold.

When looking at the exchange rate, the main variables that have influenced recent history are the evolution of rates (both local and international), the price of copper and risk. While country risk remains stable, with the current constituent process not having the same impact as last year, the price of copper and expectations of the FED rate have driven the dollar locally to levels above the psychological barrier of 900.

Statements by Fed participants that the fight against inflation is not over and would require more work, translate into keeping rates at current high levels for longer than the market expects .This has generated an appreciation of the multilateral dollar, which has gone from 103 at the beginning of September to 105.8 at present, which is reflected in a Euro that has fallen from 1.08 to 1.06. This effect, added to the lowering of local rates within expectations, took the dollar to the highest levels since November of last year.

A third factor is the price of copper, which although it has not fallen to lows and remains firm in the range between 3.65 and 4.0, a lower demand from China -mainly due to the problems in the real estate sector- has left copper lagging behind other commodities such as oil, which in terms of exchange have also influenced the rise of the local dollar. -mainly due to the problems of real estate giants- has left copper lagging behind other commodities such as oil, which in terms of trade have also influenced the rise of the dollar locally.

With the rest of the currencies in the region, except for the Argentine peso, appreciating during the year, the fall we expected towards the vicinity of 800 will apparently have to occur next year, when we have more clarity on the horizon in which the Fed rate will remain at high levels and the effect of the fall in the local interest rate is discounted. This is because the current levels are tail events such as the pandemic, and local risks that are not present today.

Gustavo Gallardo Casal, CMT

Sales & Trading Assistant Manager