- The Dollar falls 0.02% on the day against the Chilean Peso, consolidating within the range of the previous session.
- The US Consumer Price Index was up 2.7% year-on-year in November, in line with market projections.
- Investors’ attention will be on the interest rate decision of the Central Bank of Chile next week.
USD/CLP reacted lower from a more than one-week high not seen since December 3 at 978.48, where it attracted sellers who took the pair to a daily low at 972.73. Currently, the USD/CLP trades above 974.48, falling 0.02% on the day.
The Chilean peso operates without significant changes after the inflation data from the United States
Based on information presented by the United States Department of Labor, year-on-year inflation in November, measured by the Consumer Price Index, increased by 2.7%, in line with the consensus of analysts. This figure is slightly above the 2.6% recorded in October.
On the other hand, core inflation that excludes food and energy stood at 3.3% in the same period, remaining unchanged in relation to previous and forecast data.
The focus of investors will be on the interest rate decision by the Central Bank of Chile, to be published on December 17. The monetary authority is expected to continue the recent expansionary monetary policy and cut rates by 25 basis points from 5.25% to 5.00%.
Technical levels in the USD/CLP
USD/CLP reacted lower at short-term resistance given by the November 14 high at 989.15. The closest support is at 966.89, the December 6 low in convergence with the 78.6% Fibonacci retracement. The next key support is seen at 894.25, the pivot point of September 30.
USD/CLP Daily Chart
The US Dollar FAQs
The United States Dollar (USD) is the official currency of the United States of America, and the “de facto” currency of a significant number of other countries where it is in circulation alongside local banknotes. According to 2022 data, it is the most traded currency in the world, with more than 88% of all global currency exchange operations, equivalent to an average of $6.6 trillion in daily transactions. After World War II, the USD took over from the pound sterling as the world’s reserve currency.
The single most important factor influencing the value of the US Dollar is monetary policy, which is determined by the Federal Reserve (Fed). The Fed has two mandates: achieve price stability (control inflation) and promote full employment. Your main tool to achieve these two objectives is to adjust interest rates. When prices rise too quickly and inflation exceeds the 2% target set by the Fed, the Fed raises rates, which favors the price of the dollar. When Inflation falls below 2% or the unemployment rate is too high, the Fed can lower interest rates, which weighs on the Dollar.
In extreme situations, the Federal Reserve can also print more dollars and enact quantitative easing (QE). QE is the process by which the Fed substantially increases the flow of credit into a clogged financial system. This is an unconventional policy measure used when credit has dried up because banks do not lend to each other (for fear of counterparty default). It is a last resort when a simple lowering of interest rates is unlikely to achieve the necessary result. It was the Fed’s weapon of choice to combat the credit crunch that occurred during the Great Financial Crisis of 2008. It involves the Fed printing more dollars and using them to buy US government bonds, primarily from financial institutions. QE usually leads to a weakening of the US Dollar.
Quantitative tightening (QT) is the reverse process by which the Federal Reserve stops purchasing bonds from financial institutions and does not reinvest the principal of maturing portfolio securities in new purchases. It is usually positive for the US dollar.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
