After five years marked by political and economic uncertainty, Chile seems to be entering a different phase. 2025 will close with a stronger peso against the dollar, and signs point to next year bringing a more structural change in trend. 

This year, the dollar fluctuated between highs of $1,018 and recent lows of around $910, breaking projections that placed it above $950. What explains this appreciation? Factors such as expectations of a change in government, together with the reactivation—albeit early—of certain sectors of the economy, seem to augur a change of regime, and this has prompted major players to reevaluate their hedging policies. With a high probability of improvement, the so-called "unwind" of positions has explained the recent increase in trading volumes and much of the recent decline in both the exchange rate and the forward points curve. 

It seems that after years of constitutional uncertainty and failed reforms, the market perceives greater institutional clarity. Another important factor is the convergence of downward rates: with the US completing the cuts that the market expected for this year, there is room for Chile to continue on the path to normalization without impacting the rate differential. It is important to remember that, during the first half of 2023, the dollar traded in a range between 780 and 820. When, in June, the Central Bank began to lower the rate from levels above 11%, with the FED rate remaining unchanged, the spread between the two rates began to fall and the dollar in Chile reached levels above 1000. With the US lowering its rate, there is now room for the Central Bank to lower its rate without significantly affecting carry trade flows. 

Additionally, a more predictable political landscape and pro-growth policies could boost investment and economic activity. Although the future president faces a challenging period, the various stakeholders should—at least initially—allow room for more pro-market changes that will increase investment. 

If these conditions consolidate, the dollar could move toward more "normal" ranges, even closer to $800 in the medium term. 

To counterbalance this: what could go wrong? Although the scenario is less uncertain, as shown by the local stock market and currency trends in recent months, this does not mean there are no risks: copper prices, the global economy, and internal stability will continue to be essential factors. On this last point, the incoming government's ability to align the current opposition to support its new policies, which will be diametrically opposed to what we have seen over the last four years, will be key. 

All in all, 2026 could mark the beginning of a different cycle for Chile. This is not triumphalism, but rather recognition of signs that point to a more favorable environment. Those of us who study technical analysis know well that there is a lag between financial markets and the economic cycle, with the former tending to anticipate the latter. We also know that the market is rarely wrong in this regard. Let's hope this is no exception. 

Gustavo Gallardo, CMT 
Trading Manager, Fynsa Money Desk