Chile: Chilean peso depreciates to multi-year low at the beginning of 2016
January 13, 2016
The Chilean peso weakened to a fresh low in January, continuing the overall depreciation trend that has been in place since May 2013. The peso was somewhat volatile in recent weeks and on 11 January the currency traded at 731.9 CLP per USD, which was the weakest value in many years. The reading represented a 3.2% depreciation over the same day in December 2015 and a 19.1% depreciation in annual terms. Since the beginning of this year, the peso lost 3.2% of its value.
Ongoing weakness in the peso is mainly the result of lower growth prospects for the Chilean economy and struggles in the country’s important mining sector. Slowing demand from China—the largest buyer of Chile’s top export, copper—amid a restructuring of China’s economy is the main reason behind a prolonged fall in copper prices. In fact, copper prices dropped to an over-six-year low in December. In addition, the depreciation of the peso also reflects that the U.S. dollar is gaining strength on the back of an improving U.S. economy and growing risk aversion regarding emerging market currencies.