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Scotiabank Say Guidance Adjustment Could Have Upward Impact On Nominal Swap Rates

CHILE
  • Scotiabank have noted the strong aggressiveness to cut the policy rate shown last January is now behind us. The latest BCCh statement should be interpreted by the market as more aggressive and conservative than that incorporated in the swap rates, with the consequent appreciation impact on the Chilean peso.
  • Indeed, even if the BCCh opts for 75bps as expected, the absence of commitment to cuts of similar magnitude in the future and the concern about the transitory nature of this “summer inflation” coming from the rise in the exchange rate and adjustments in some services would have an upward impact on nominal swap rates.
  • This would support a new wind of carry trade positions by non-residents in favour of CLP.
  • If external conditions are favourable for commodity exporters, Scotiabank could consider that an appreciation of the peso, with volatility, will begin in the near future.
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  • Scotiabank have noted the strong aggressiveness to cut the policy rate shown last January is now behind us. The latest BCCh statement should be interpreted by the market as more aggressive and conservative than that incorporated in the swap rates, with the consequent appreciation impact on the Chilean peso.
  • Indeed, even if the BCCh opts for 75bps as expected, the absence of commitment to cuts of similar magnitude in the future and the concern about the transitory nature of this “summer inflation” coming from the rise in the exchange rate and adjustments in some services would have an upward impact on nominal swap rates.
  • This would support a new wind of carry trade positions by non-residents in favour of CLP.
  • If external conditions are favourable for commodity exporters, Scotiabank could consider that an appreciation of the peso, with volatility, will begin in the near future.