CLP: Paring Recent Losses as Markets Digest Implications of Reserves Program
Aug-07 16:46
USDCLP continues to pare Wednesday morning’s gap higher, which was triggered by the surprise announcement from the BCCh that it would be starting a reserve accumulation program starting August 8.
- While ongoing USD purchases are expected to affect flow dynamics for the currency and could mechanically weigh on future gains, analysts note that the size of purchases this time around (compared to previous programs in 2021 and 2023) are more gradual. For its part, the BCCh stressed that the goal of the program is not to change financial conditions nor affect the FX rate.
- Sell-side analysts have therefore generally maintained their positive views regarding the peso, with the likes of JP Morgan and HSBC maintaining long positions in the currency (see a summary of views here).
- Meanwhile, Scotiabank estimate an impact of no more than CLP 0.5 for each USD bln purchased, which leads them to expect an impact of no more than CLP 10 on the exchange rate as a result of the program, which would be diluted over the course of the accumulation due to the rise in nominal short rates given the sterilization.
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