Price of the Dollar in Chile today, Thursday, June 27: The Chilean Peso depreciates due to the fall in copper

  • The USD/CLP signs its second consecutive session higher.
  • Copper prices continue to fall as inventories rise.

The USD/CLP made a daily low during the European session at 948.77, where it found buyers who took the pair to a daily high at 957.85. At the time of writing, the price of the US Dollar against the Chilean Peso is trading at 956.94, gaining 0.20% on the day.

Copper remains on the downtrend amid concerns about weak demand

Copper demand in China remains weak, given a US dollar that has strengthened in the short term. Metal inventories remain high on the Shanghai and London stock exchanges. The recent economic data from the United States has caused a rebound in the Dollar Index (DXY), reaching highs not seen since May 1 yesterday.

Investors are keeping an eye on the unemployment rate that the National Institute of Statistics of Chile will publish this Friday, whose previous reading for the month of April stood at 8.5%.

Technical levels in the USD/CLP

The Exponential Moving Average, which is currently at 945.43, remains as support in the short term, following the bullish trend. The next support is found at 905.00, the minimum of June 5, which coincides with the retracement at 78.6% Fibonacci. The nearest resistance is at 965.00, the April 24 high.

Chilean Peso 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

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