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USDCLP Extends Surge Higher, Rallies Another 1.50%

CHILE
  • Despite the broad-based greenback consolidation in early US trade on Wednesday, USDCLP is extending the substantial bounce seen this week, advancing a further 1.5% on the session at typing. Price action extends the bounce from last Friday’s lows to nearly 5%.
  • The aforementioned remarks from BCCh President Costa surrounding the progress for inflation may be contributing to the CLP’s renewed weakness, playing into the flexible approach that the central bank has been adopting at each policy decision. Copper futures edging back towards 400 is also providing a peso headwind.
  • Analysts have been noting the CLP volatility as continuing to stand out in the region. Implied one-month volatility hasn’t been this high compared with Brazil since the threat of radical constitutional changes rattled markets in 2021 and 2022. One strategist stated that CLP “has been the last remainder of EMFX volatility”, with another remarking that “if Chile’s central bank took the approach of Brazil and communicated a constant pace of rate cuts for a foreseeable future, CLP volatility would have also collapsed”.
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