Citi Advises On Rising CLP

With another strong day for Copper (+1.9%), the Chilean Peso (+0.92%) followed suit, rallying in line with LatAm peers. Citigroup have published a trade recommendation: buying a 750 two-month put with a target of 710. Strategists Dirk Willer and Andrea Kiguel noted:

• Latam currencies will benefit from the vaccine trade, which is not yet fully priced in.
• Pension fund outflows will probably also be supportive for the Chilean peso.
• It is expected that second round withdrawals will be lower than the first given that redemptions would be treated as income and taxed for those in higher income brackets
• AFPs will probably sell liquid foreign instruments first, in addition to the bonds included in the BCCh's repo facility; this could mean a CLP inflow of $6b as early as this month.