“Panic, Pure Panic” – Chilean Peso Collapses To 800/USD, Blowing Through Record Lows
The Chilean peso extended a four-day losing streak on Tuesday, sinking by the most in eight years, to a new record low at 800/USD.
Bearish market sentiment, political chaos, and a national strike intended to ratchet up pressure on the government and its plans to change the constitution…
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“This is panic, pure panic,” said Felipe Alarcon, chief economist at EuroAmerica in Santiago.
“It’s the gringos leaving the country.”
However, Bloomberg reports that Citigroup believes that the Chilean peso is not yet at a stage where BCCh would intervene.
The central bank last stepped into market in 2009, when CLP’s real effective exchange rate was ~9% weaker than the current level (REER was about 3% weaker in 2014-15 vs now and the bank didn’t intervene back then).
Citi adds that Chile’s low growth, low inflation environment means country can afford weaker currency without much discomfort.
But, according to Eurasia, President Ivan Duque’s low political capital “heightens social risks as discontent with the administration will probably increase adherence to a national protest” planned for Nov 21.
