Neutral bias on the Chilean peso – BAML
FXStreet (Edinburgh) – Analyst at BAML Ezequiel Aguirre sees the perspective for the Chilean currency as neutral in the near to medium term.
Key Quotes
“Copper prices plunged in recent weeks, adding a new downside risk to the Chilean economy. In truth, oil prices dropped even more, and hence Chile’s terms of trade (ratio of the prices of exports to the prices of imports) have probably not dropped nearly as much in comparison to some of its South American peers – given Chile is the biggest net oil importer in the region in terms of GDP”.
“We expect growth to remain at about 2% in 2016. Fiscal and monetary policies will become less expansionary next year (more below), the expiration of a tax credit will probably be negative for construction, and exports are unlikely to drive the economy out of the slump, in our view”.
“We stay neutral on the Chilean peso. On the positive side, the exchange rate has adjusted to lower terms of trade, the trade balance is well into surplus, and the peso is undervalued based on fundamentals. On the negative side, the economic recovery has lost momentum and copper prices are falling sharply. Uncertainty around the constitutional reform is also hampering business investment”.
Analyst at BAML Ezequiel Aguirre sees the perspective for the Chilean currency as neutral in the near to medium term…
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