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Chilean Peso Declines in the Face of Global Uncertainty

February 3, 2025 (Investorideas.com Newswire) Investorideas.com, a go-to platform for big investing ideas releases market commentary from Quasar Elizundia, Expert Research Strategist at Pepperstone.

"Despite solid domestic growth indicators, the Chilean peso's performance during the session is being overshadowed by external tensions that are unsettling markets. In this context, it is crucial to highlight that the currency has weakened due to the rise in global trade tensions. The investors' preference for safe-haven assets, particularly the U.S. dollar, has intensified. Additionally, fears that tariff measures could drive inflationary pressures have further supported the USD's strength in international markets.

The recent imposition of tariffs by President Trump on key countries-25% on Mexico and Canada and 10% on China-has significantly contributed to volatility in the trade environment. These tariff adjustments, beyond addressing U.S. trade deficit reduction goals and concerns over immigration and drug trafficking, have triggered an immediate retaliatory response from the affected nations. Specifically, China has warned of countermeasures to safeguard its interests, while in other markets, the possibility of new tensions arising, even in the European sector, is being anticipated, adding another layer of uncertainty.

In contrast, Chile's domestic economic data demonstrates remarkable resilience. The December 2024 Imacec Index posted an annual growth of 6.6%, marking the largest increase since January 2022, reflecting the strength of sectors such as mining and goods production, which grew by 15.1% and 13.3%, respectively.

This rebound, accompanied by a 0.9% increase in monthly economic activity, underscores the capability and dynamism of the Chilean economy, particularly in copper and lithium extraction, which are key components of the country's production matrix. However, despite this strong domestic performance, pressures stemming from global trade tensions continue to cloud the outlook for the Chilean peso."

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