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Why Are Falling Copper Prices Pressuring the Chilean Peso?

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Copper fell by 1.5%, peso followed a similar path

Copper futures prices fell by 1.5% on August 22, 2016. The Chilean peso has a high correlation to copper prices—copper is Chile’s major export. As a result, the peso followed a similar path. The US dollar-Chilean peso currency pair, inversely related to the Chilean peso, rose by 0.94% on August 22. For more details on the correlation between commodities and currencies, read Correlations Between Commodities and Global Currencies.

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Review of upcoming macro data

Markets could be driven by speculation until multiple data release from the Chilean National Institute of Statistics on August 30. The year-over-year copper production and industrial production is expected to be below the previous month’s figures. They’re expected to fall by 7.7% and 3.8%, respectively. A similar weakness is expected in the retail sales data. The data are expected to rise by 1.0%—compared to 5.0% the previous month.

Impact on the market

As for ETFs, the iShares MSCI Chile Capped ETF (ECH) fell by 1.5% on August 22, 2016, as the Chilean peso also traded weaker. The ProShares Ultra Bloomberg Crude Oil ETF (UCO) was trading 6.1% lower as well.

Chile-based ADRs (American depositary receipts) were performing on a mixed note on August 22. Enersis (ENIC) was trading on a higher note—it rose 1.4% by the end of the day. LATAM Airlines Group SA (LFL) and Empresa Nacional de Electricidad SA (EOCC) were trading 2.5% and 1.4% lower, respectively.

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