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Goldman Sachs Upbeat On Chilean Peso

CHILE
  • Three Factors likely to support the Chilean Peso over the medium term:
  • Evidence suggests that older, more fully-vaccinated age groups are seeing declining rates of new cases and severe disease. This should support an eventual reopening of the economy in coming months.
  • Expect rates to start climbing later in the year, which should further support the local currency.
  • CLP consistently scans as cleanest EM FX expression for significant copper rally which they still expect over the coming year.
  • Recommend going long CLP on a roughly trade-weighted basis, given cross-currents affecting the broad Dollar. In particular, recommend going long CLP versus an equal-weighted basket of the five currencies with the largest weights in Chile's TWI (CNY, USD, EUR, BRL and JPY)
  • Risks to CLP longs include:
    • Low to negative carry, depending on the funding currency.
    • Risks of a sustained wobble in the price of copper.
    • Lingering questions around Brazil Variant and Sinovac efficacy.
    • Tail risks around Chile's Constitutional Convention election in mid-May.
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