Those are the questions prompted by today’s surge in the peso to a three-year high, which took it through the level at which the central bank in January announced a $12bn intervention programme. As Reuters reports, strong foreign bets on the peso have contributed.
Some analysts believe all this could prompt the central bank to increase its daily dollar intervention, but Alex Pigatto at Nomura Securities reckoned that was most likely if the spot rate reached around 450, not at current levels.
Local investment bank Bci also sees a “very marginal” impact from a $50m dollar rise in the daily purchases and is “sceptical” on capital controls – and José De Gregorio, the central bank president appears so too. Just a fortnight ago, in a presentation, he said:
A more debated tool is the use of capital controls, particularly in countries that are going through a period of important net capital inflows. This is not the case of Chile.
Indeed, he has been at pains to highlight that Chile’s peso appreciation against the dollar has not been dramatically different from the situation in other commodity exporting countries or countries which have implemented forex measures.
Peso appreciation is not the only headache for Chile. The net energy importer is finding inflation hard to tame amid oil price rises – the unattractive downside of being the continent’s most open economy – and the bank sees the inflation rate overshooting its target this year.
Whether to add capital controls to its battery of weapons or what to do instead are questions that look like weighing on the bank’s mind for a while to come.
Related reading:
Chile file, beyondbrics
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