The Central Bank of Chile has announced the injection of $ 20 billion into the economy, including a program selling foreign currency until the end of May 2020, to curb the collapse of the peso, which was Thursday, November 28 new record down.
The monetary institution announced in a statement that it had "Decided to intervene in the foreign exchange market for a maximum amount of $ 20 billion, from Monday, December 2 to May 29, 2020", with a "Sale of dollars (on the foreign exchange market) for a maximum amount of 10 billion dollars" and an "Sale of hedging (risk) instruments for up to $ 10 billion".
The Central Bank had already announced November 13 injection of $ 4 billion, which did not help stem the fall of the local currency in a continuing context of serious social crisis.
Social crisis and fall of the international copper price
The peso lost 1.1% Thursday, reaching a record low for the second day in a row, with a dollar trading at close against 828.36 pesos. During the day, the peso even plunged to 838 units for one dollar, because of the concern of the markets in the face of a social crisis that does not subside, combined with a fall in international copper prices, of which Chile is the world's largest producer. Wednesday, he had already lost 1.6% of its value against the dollar, trading at 812 pesos against a greenback, already a record down.
According to the Central Bank, because of the "Low indexation in dollars" of the Chilean economy, the peso variations have no immediate effect on households and businesses and inflation will remain "Moderate", below 3%. The institution, however, justified its intervention by explaining that"Excessive degree of exchange rate volatility hampers price formation, spending and production decisions of individuals and businesses", which raises "Market concerns".
Since October 18, the date of the outbreak of the worst social crisis of three decades in Chile, the currency has lost about 15%. If the decline in copper prices caused by the trade war between the United States and China has had an impact on the fall of the peso, "Is 90% due to the crisis"explains Francisco Castañeda, economist at Santiago University, Agence France-Presse.
The Central Bank also advanced its monetary policy meeting on December 5 to try to reassure the markets, which hope to maintain the key rate at 1.75%. Thursday, the IPSA, the main index of the Santiago Stock Exchange, also closed down (-2.23%).
