Chilean Peso Recovers as Copper Prices Rise Despite Middle East Tensions

Market Movements and Copper Price Impact

The dollar experienced a decline on Monday, closing at $934,46, down $3,85 from the previous Friday, according to Bloomberg data. This move followed a peak reached the previous week, driven largely by a recovery in the price of copper. The benchmark Comex copper future rose 1,28% to US$6,34 per pound as market participants reacted to reduced inventories and supply risks. “El principal soporte para el peso chileno proviene del cobre (…) retomando su tendencia alcista y entregando respaldo adicional a la moneda local. A esto se suma una recuperación en los mercados bursátiles internacionales, favoreciendo el apetito por activos de riesgo”, said Rodrigo Castillo, director general de BeFX.

The currency’s path remains volatile. The dollar in Chile initiated trading on Monday, July 20, near $934,45, showing an increase of $1,1, or 0,12%. The resilience of the metal price is bolstered by supply concerns from Chile, where a strong storm affected mining and port operations in the central zone, forcing companies such as Codelco, Antofagasta, and Anglo American to activate safety protocols. Furthermore, Antofagasta reported a drop of 9,5% in its copper production for the first semester, while BHP warned that its production in Chile could decrease next year.

Geopolitical Tensions and Inflationary Risks

External factors continue to weigh heavily on the Chilean market. Tensions between the United States and Iran have escalated, with the Iranian Revolutionary Guard Corps claiming on Monday that it had attacked U.S. military installations across the Middle East. Additionally, the Houthi rebels of Yemen, aligned with Iran, announced a naval blockade on Saudi Arabia, expanding the threat to global energy supply and trade outside the Persian Gulf. These developments have pushed oil prices higher, with Brent crude closing up 1,3% at US$89,22 per barrel—having touched US$91,42, its highest since June 11—and West Texas Intermediate (WTI) advancing 0,9% to US$83,23, reaching its highest level since June 12 at US$85,39, according to Reuters.

“En el plano internacional, los inversionistas continúan equilibrando dos fuerzas contrapuestas. Por un lado, persisten las tensiones geopolíticas tras una nueva escalada del conflicto entre Estados Unidos e Irán, lo que mantiene al petróleo en niveles elevados y podría dificultar nuevas caídas de la inflación, reduciendo el margen de la Reserva Federal para recortar tasas. Por otro, el mercado comienza a enfocarse nuevamente en los fundamentos económicos y en el inicio de la temporada de resultados corporativos, donde las cifras de grandes compañías tecnológicas y financieras serán claves para definir el ánimo de los inversionistas.”

Rodrigo Castillo, director general de BeFX

This environment of risk aversion has strengthened the dollar index, which rose 0,17%. Market expectations are shifting, with the market now assigning nearly a 53% probability to a rate hike in September, as noted by Felipe Sepúlveda Soto, chief analyst at Admirals Latinoamérica.

Foreign Investor Positioning and Future Outlook

A structural factor influencing the peso is the heavy volume of positions held by non-residents. According to Rodrigo Castillo, bets against the Chilean peso remain at around US$ 16.978 million, a historically elevated level that continues to provide structural support to the dollar while increasing the exchange rate’s sensitivity to international scenarios.

Regarding the outlook for the currency, Felipe Sepúlveda Soto of Admirals Latinoamérica noted: “Para hoy, el dólar podría moverse en un rango cercano a $930-$940. Si el cobre mantiene el rebote, podría limitar las alzas; pero si aumentan las tensiones geopolíticas o el petróleo sigue subiendo, el tipo de cambio podría buscar nuevamente la parte alta del rango.”

Sources: DF, Portal Innova.