Chilean peso gained yesterday against other currencies, notably against the U.S. dollar, after the Central Bank of Chile President, José de Gregorio, commented that the bank will have to increase rates again on the next meeting.
Now there are two expected events that are supporting Chilean peso on Forex. First one is the expected rate cut by the Federal Reserve in the United States. After the Bernanke‘s yesterday speech there is almost no doubt left among the investors, that the FOMC will cut the main interest rate by 0.50% during the January 30 meeting. Second one is the almost unavoidable interest rate increase by the Central Bank of Chile next month.
Current interest rates difference between the U.S. and Chile’s currencies is 2% in the favor of peso with 4.25% and 6.25% respectively. After the both central banks’ next rates decisions the difference will rise up to 2.75% giving even more potential to the Chilean currency.
Peso was posting a 1.1% increase during the trading session yesterday after the situation with the interest rates became more clear, but it closed with a more moderate gain of 0.48%.
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