The USD/CLP jumped from 850 to record highs above 1050. According to analysts at Wells Fargo, the move could be identified as overshooting and the currency could be oversold. They see a potential appreciation ahead for the Chilean peso of around 6% in the short term.
Key Quotes:
“Our analysis reveals the Chilean peso may be oversold at current levels. In fairness, the Chilean peso has rightfully come under pressure. Copper prices have dropped significantly, and given Chile's reliance on copper, the drop in prices has spilled over onto the currency. In addition, Central Bank of Chile policymakers have underwhelmed markets on multiple occasions when it comes to monetary policy.”
“As depreciation pressure mounted, policymakers have resisted any form of FX intervention, and as of now, seem unwilling to use FX reserves to support the currency. This combination has the Chilean peso in free-fall and hitting new lows against the greenback on a daily basis. However, we believe the currency is oversold and now misaligned with country fundamentals.”
“From a technical perspective, we believe market participants will notice this imbalance and the peso can recover. In addition, we believe the recent selloff will force Central Bank of Chile policymakers to raise policy rates more aggressively and extend the tightening cycle, as well as intervene in FX markets and defend the currency.”
“As policymakers step up policy tightening and intervention efforts, the currency can rebound back toward the upper bound of its potential depreciation range. In that sense, we believe the Chilean peso can rally 6% in the short-term.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD off lows, stays heavy below 0.6450 amid weak Australian GDP, China's PMI
AUD/USD holds sizeable losses below 0.6450 in Asian trading on Wednesday after testing the 0.6400 level earlier on. The pair bears the brunt of weaker Australian Q3 GDP data, disappointing Chinese Caixin Services PMI and US-Sino trade worries. Focus shifts to more US data and Powell's speech.
USD/JPY rises back above 150.00 on renewed USD buying
USD/JPYhas regained 150.00 in Wednesday's Asian session, looking to extend the latest leg higheer. Increased haven demand for the US Dollar on growing tariff war fears underpins the pair despite bets for a December BoJ rate hike. US ADP data and Powell's speech are eagerly awaited.
Gold awaits Fed Chair Powell’s speech for a fresh directional impetus
Gold price is holding onto minor bids early Wednesday, struggling to build on the previous bounce, anticipating a fresh batch of top-tier US economic data releases and Federal Reserve Chairman Jerome Powell’s speech.
Paul Atkins shows reluctance to replace SEC Chair Gary Gensler
Paul Atkins, regarded as a leading candidate to succeed Gary Gensler as Chairman of the Securities & Exchange Commission, has reportedly expressed a lack of enthusiasm for the position.
The fall of Barnier’s government would be bad news for the French economy
This French political stand-off is just one more negative for the euro. With the eurozone economy facing the threat of tariffs in 2025 and the region lacking any prospect of cohesive fiscal support, the potential fall of the French government merely adds to views that the ECB will have to do the heavy lifting in 2025.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.