at46 wrote:john wrote:My comments were related to the CLP exchange rate. The data does not support any strong correlation between stock returns and exchange rates.
Isn't it all about the copper price? Correlation of 0.93 with the peso rate. Also, what about the currency swap with China that moved 10% of Chile/China trade off of the US dollar? China is making a lot of those swap deals around the world that are totally not pro-dollar. Who knows how that's gonna play out? The only thing the US can counter that with is by continuing to blow up regions of the world, now that vampire squidding on the faces of Europe/Japan and a bunch of others is getting harder.
Good points! Yes, the price of copper has historically been a strong correlating factor with the value of the CLP. However, based on continued low economic growth rate projections for industrialized economies, there doesn't seem to be much upside potential for copper prices to rise over the next couple of years. In my opinion, the magnitude of the Chinese currency swap deals you referenced won't be much of a mitigating factor on the exchange rate value of the US dollar...at least not in the next few years. Moreover, disproportionate US ownership of world financial assets suggests continued US dominance in world financial markets.