With the Central Bank's decision, where the rate was lowered by 75 basis points -which is the low end of expectations- one should have expected the dollar to fall back from the 865 pesos or so it was trading at prior to the decision. one would have expected the dollar to fall from the 865 pesos it was trading at prior to the decision.

Unfortunately for many, the reality was different, with the price reaching 890 pesos, with 900 just around the corner. In addition, the increase in US rates -which resulted in a multilateral dollarwhich implied a multilateral dollar up nearly 3% in 7 sessions - resulted in an even sharper decline in rate differentials.

With the above, the local appetite causes stop losses of short positions that exacerbate the rallies, with CLP depreciating by more than 4% in the month (as it has so far this year), reaching the highs of December last year.. It is also important to consider that the depreciation of the local currency has incorporated the sale of up to 8.5% of the local currency. has incorporated the sale of up to USD 8,000 MM until December (up to USD 2,000 MM monthly) by the budget management announced at the end of last month.

In the current scenario, one wonders how far this rise should go. From a technical analysis point of view, we have resistance in the 895-900 area. It is difficult to think of a significant breakout from this level, especially seeing that the other comparable currencies have appreciated by 10% over the year on average, and are virtually unchanged for the month.

Now, considering the current information, and taking into account that we should be in the final part of the US rate hike cycle, it is necessary to highlight that the current scenario considers the worst conditions for the CLP, with a local rate that by the end of the year should reach 8%, which is 150 bp less than the current level. In other words, it is very likely that the news is discounted, so it is not out of the question to see levels closer to 850 for the remainder of the year.

Gustavo Gallardo, CMT

Assistant Manager Sales & Trading Fynsa