Investors around the world were encouraged to exchange their assets for dollars this Friday, driven by the expectation that the Federal Reserve will raise rates more strongly after knowing solid employment figures in the United States, causing the exchange rate in Chile rises until it crosses $920.
According to Bloomberg, parity increased by $15.74 and closed its local operations at $918.64. This allowed it to rise $15.94 in the last five days, after collapsing $75.80 in the course of the previous two weeks, where the Central Bank’s foreign exchange intervention made itself felt strongly.
The Chilean peso was the third most depreciated currency in the world in the last weekwith a fall of 1.82% against the dollar. In the ranking of emerging currencies, it was positioned in the first place.
This, despite the fact that spot copper exhibited this Friday an increase of 2.47% to US$3.55 per pound on the London Metal Exchange, which allowed it to close the week with a slight advance of 0.4%.
“The space for the recovery of the price of the metal in the short term will be limited”, warned the Chilean Copper Commission (Cochilco) in its weekly report, adding that “the surprising slowdown data of the manufacturing industry in China confirm that the recovery It will be slow.”
The relative economic stability of the Asian giant has positioned itself as a key support for copper prices in recent days, as activity indices show more pronounced deterioration in other regions, such as Europe.
The Central Bank reported this Friday a reduction in FX sale amount spot of its intervention program for next week, which considers US$ 625 million in total. The weekly itinerary also involves FX sales forward to 28 days for US$ 2,185 million and purchases of fx-swap for $400 million.
Pablo García and the balance after the intervention: “The distortions that were affecting the foreign exchange market have been mitigated”
perspective twist
The week of the exchange rate in Chile reached double digits due to a resurgence of concern in international markets after a surprise increase in jobs in the US during the last month.
Specific, July nonfarm payrolls increased by 528 thousandmarking a strong increase compared to the 372 thousand of the previous month and destroying the general forecasts of 250 thousand payrolls.
At the same time, the unemployment rate reached its lowest level since February 2020, falling to 3.5%compared to forecasts that it would remain at 3.6%.
“These favorable figures generate a greater appreciation of the dollar worldwide, since if we do not see a close impact on the labor market, there would be more confidence in rate hikes, despite the economic slowdown,” said the head of studies trading of Capitaria, Ricardo Bustamante.
The dollar index -which measures the global strength of the US currency- surged on the release of labor data and registered an increase of 0.81% to 106.54 points. With this, it completely reversed its fall on Thursday and advanced 0.61% in the week.
In reference to the CPI data that will be published next week, Bustamante added that “if we continue to see figures that exceed projections in the US and inflation that continues to break record highs, the dollar may well continue to appreciate further.”
The publication of the labor report impacted all asset classes, but especially fixed income. The yield on the 10-year US Treasury bond grew 14.2 basis points to 2.83%Meanwhile he bundle Germany rose 15.2 basis points to 0.94%. The return on a bond is inversely proportional to its price.
Furthermore, the two-year US Treasury note – sensitive to expectations of interest rate hikes – rose 20.4 basis points to 3.24%, posting a seven-week high.