Market Setup of the Day: US Dollar vs. the Chilean Peso


Pairing the US Dollar (USD) with Chilean Peso (CLP) may present a trading opportunity where the USD may be able to gain, as traders around the world eagerly await the affirmation of their expectations of a rate increase from the US Federal Reserve Bank (Fed). The CLP may be a currency the USD can regain some lost value against.

In its policy meeting which will end later in this day, the Fed is expected to raise its interest rate target by 0.25 percentage points to 0.50-0.75 percent. This Increase would be just the second rate hike since the financial crisis in 2007-08. "The markets think a rate hike is a certainty so the focus is on the outlook for next year. I think they will maintain their previous projections to raise rates twice next year but if they turn more hawkish, the dollar will test its upside again," says Shinichiro Kadota, chief FX strategist at Barclays.


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There is a possibility of the expectation among some analysts that the  USD/CLP pairing can move towards the top of its recent range close to 680 vs 1 USD in the coming months. This  particular outlook is driven by a number of factors including continued USD strength as the Fed looks to tighten, while the rest of the world continues to ease, broad-based rising outflows behind fears of a more protectionist stance from the US in regards to trade, Chilean cuts of key interest rates, a slowdown in the rise of copper prices, and a slowdown in global growth.