Those classified as “non-residents” increased their net position against the Chilean peso by over US$1.1 billion during the last week.The sudden rise
Those classified as “non-residents” increased their net position against the Chilean peso by over US$1.1 billion during the last week.
The sudden rise of the dollar to the level of $990 on Tuesday in Chile was driven by adjustments in the carry trade strategies of foreign agents, in anticipation of inflation figures in the United States to be released this Good Friday, and later the monetary policy decision of the Central Bank of Chile.
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In the early afternoon, after a morning with little movement, the exchange rate jumped by $8.98 to $988 on Bloomberg screens, suddenly reaching its highest levels of the session, nearing $989.43, the 17-month high reached at the close on February 26. Shortly after, it moderated to $984, with no significant movements in the external front, where Comex copper fell 0.17% to $4.01 per pound.
What is driving the dollar up is that assets are positioning themselves again in bets against the Chilean peso, and I estimate that we are already close to the year’s highs, with $8.4 billion against the local currency. Every time the dollar falls sharply, someone stops it and starts buying quite aggressively. It tends to be consistent when foreigners are trading, looking for entry points.
Over the last week, those classified as “non-residents” recorded over $1.1 billion in net purchases of foreign currency, mainly through forwards. The net position stands at around $7.8 billion against the Chilean peso at the close on Friday, according to data from the Central Bank.
What motivates non-residents? Disarming their carry trade positions in Chile to seek attractive deposits elsewhere. The fact that it is a short week could influence, and global market participants are operating with an eye on Friday’s US consumption and personal spending data. The stance of a Central Bank still willing to cut rates aggressively continues to resonate in calculations.
A few days before the Central Bank’s decision, the exchange rate would put great pressure on the policy decision. Additionally, the rise of the dollar on Tuesday would be purely speculative, as we see that today’s data from the US turned out to be mixed.
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