Chile: Copper and political uncertainties strain the CLP – Nordea
|The CLP collapsed last year to all-time-low levels following the eruption of anti-government protests. The CLP risks are still tilted to the downside given that political uncertainty remains and copper prices are dropping, strategists at Nordea apprise.
Key quotes
“The CLP was hit hard by increased political uncertainty, losing more than 14% during October-November 2019 and weakening to all-time low values versus the USD. Our event study analysis shows that political revolt may have explained almost 9 pp of this weakening, while global risk sentiment deterioration accounted for the remaining 5 pp.”
“The CLP recovered by around 11% at the end of 2019. However, the premium for political uncertainty has not completely gone from the CLP and may continue to weigh on the currency in the near future as new minor conflicts between police and individuals happen occasionally.”
“The plunge in copper prices of 9% since the coronavirus outbreak in China has also hit the CLP. Copper production represents around 10% of Chilean GDP, while the share of copper in total Chilean exports exceeds 50%. As a result, CLP is a high beta to copper prices. Moreover, China accounts for more than 30% of total Chilean exports. Thus, the slowdown in the Chinese economy will definitely weigh on Chile.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.