Chile Peso 2016, starts at 717

Chile Investment, how to invest in Chile, what to watch out for when investing, economic issues, currency exchange in Chile, and more.
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Re: Chile Peso 2016, starts at 717

Postby admin » Fri Nov 18, 2016 3:26 pm

yea, there is a lot of things cooking right now. Much higher probability that the global markets crash hard, than rise over the next month or two; or, a lot more that can go wrong, than right, right now.

http://www.bloomberg.com/news/articles/ ... nald-trump
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Re: Chile Peso 2016, starts at 717

Postby scandinavian » Tue Dec 06, 2016 3:12 pm

Anybody care to explain why the peso strengthens against USD and EURO after it has been published that the Chilean economy contracted in October? Makes no sense to me.

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Re: Chile Peso 2016, starts at 717

Postby eeuunikkeiexpat » Tue Dec 06, 2016 3:29 pm

The huge move in POC as far as I can tell.
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Re: Chile Peso 2016, starts at 717

Postby admin » Wed Dec 07, 2016 8:43 am

scandinavian wrote:Anybody care to explain why the peso strengthens against USD and EURO after it has been published that the Chilean economy contracted in October? Makes no sense to me.


a). copper prices and related mining stocks are on a roll. The prospect of higher inflation in the U.S., seems to help out commodity driven markets like Chile, as long as debt is under control.

b). among the emerging markets, that have a pile of dollar debt, Chile has the least amount of debt in terms of both sovereign debt and corporate debt. Thus, will be least effected by a U.S. fed rate increase. See point 1 above.

c.) Chile's central bank, is one of the few in a position to raise interest rates in tandem with the fed.

The next few months will be bumpy, as Chile get's thrown out with the bath water of other EM currencies, but that typically stabilizes once the dust clears and everyone realizes there really was nothing seriously wrong with Chile.

d.) Chilean stock market has been on fire for months. Kind of slowing down, but still on a nice steady climb. I would expect a pull-back with the fed rate increase, matching the U.S. markets, then a continued climb going forward.

At the moment, Chile is in far better shape than most of Europe, let alone other Emerging Markets; in spite of the current administrations best efforts to shoot the economy in the foot. We are going in to the high summer employment season in pretty good shape.
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Re: Chile Peso 2016, starts at 717

Postby eeuunikkeiexpat » Wed Dec 07, 2016 10:56 am

Another idea is the value of the dollars in Chile's rainy day funds (used to be around 5% of GDP) as the dollar recently went above 100 on the dollar index there may be a real visible cushioning effect against the economic growth bad news especially as copper has regained strength at the same time.
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Re: Chile Peso 2016, starts at 717

Postby scandinavian » Wed Dec 07, 2016 12:13 pm

I guess you are right. Looks like we are back to 650 - even more extreme against the Euro - It is now at 705, was around 800 at the beginning of the year.

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Re: Chile Peso 2016, starts at 717

Postby paladin » Wed Dec 07, 2016 9:13 pm

scandinavian wrote:I guess you are right. Looks like we are back to 650 - even more extreme against the Euro - It is now at 705, was around 800 at the beginning of the year.



I suggest you give up trying to gind explanations for what are often unusual fluctuations in the value of the Peso. I've been here for nearly 20 years, and have always taken a lot of interest in the US$/CHP rate, so have read just about all the explanations imaginable that arise every time the rate changes by around 1% , only to find a few days later, the complete opposite.
I decide for myself what seems to be a reasonable rate, and when it varies by 2% or more, I buy/sell. Nobody can realistically project exchange rates in any currency, so I dont try to do that, but rather just make a reasonable return.

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Re: Chile Peso 2016, starts at 717

Postby admin » Thu Dec 15, 2016 9:52 am

Well, fed raised rates. Peso moved a bit, but surprisingly stable.

1 USD =662.573CLP

I am thinking this stability has more to do with the relative strength of the peso to the Euro, than the strength to the dollar.
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Re: Chile Peso 2016, starts at 717

Postby eeuunikkeiexpat » Thu Dec 15, 2016 11:13 am

Unheard of with the dollar index at decade plus highs.

Someone knows something or when the relationship corrects it will be big.
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Re: Chile Peso 2016, starts at 717

Postby admin » Thu Dec 15, 2016 11:28 am

I am finding the move in gold / oil ratio more interesting. historic average is like 15 - 16 barrels per ounce, and recently we have been 26+ for a long time. Finally that ratio is starting to come down. I think somewhere around $1,000 an ounce or less is where we are heading, or $60+ on a barrel on oil.

I am not really sure what is holding up Chile's peso, but will see. I think it is the lack of debt of Chile / growth. Just about every EM in the world has loaded up on debt over the last 8 years, and now all that dollar debt just got more expensive to service, and will be getting more expensive as 2017 continues.
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Re: Chile Peso 2016, starts at 717

Postby fraggle092 » Thu Dec 15, 2016 2:17 pm

admin wrote:I am not really sure what is holding up Chile's peso, but will see. I think it is the lack of debt of Chile / growth.

Apparently that's not what Fitch thinks...
The revision of Chile's Outlook to Negative reflects prolonged economic weakness, which is contributing to a relatively rapid deterioration in the sovereign balance sheet. In Fitch's view, the policy response has helped buffer the economy and preserve credibility, but it has not prevented a substantial rise in the public debt burden from the low levels that underpinned the upgrade to 'A+' in 2011.

Who knows.....
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Re: Chile Peso 2016, starts at 717

Postby admin » Thu Dec 15, 2016 2:56 pm

Chile needs to sell codelco. It sucked up 4 billion this year in capital from the country to stay afloat. Either the state becomes a passive investor or they sell it. Probably better if they just tax the output, and let it sink or swim as a public company on its own.

The communist and left however don't want to sell the sacred cow, and they seem like they can not agree on modifying the military fund. The left will lean towards not funding the military at all, if given a chance to mess with it. They have been doing everything they can to try and claw back mining rights from any company they can find an excuse.

That whole Fitch negative outlook was based on half-ass management of the bachelet administration of the economy. None of it had anything to do with anything external, perhaps beyond the price of copper. It was all self-inflicted policy moves by bachelet's clown car economics team.
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