The first six months of the year are forgotten for the Chilean peso. During the first semester, the exchange rate rose by more than $90 and was one of the currencies of the region that depreciated the most.
The fall in the value of copper, the greater global appetite for the dollar in the face of fears of an economic recession, the more restrictive monetary policies of the United States Federal Reserve to control inflation and the scenario of political uncertainty at the local level Due to the plebiscite of the new Constitution, they have been the factors that have led the US currency to rise, according to operators.
The same analysts say that the efforts of the Ministry of Finance to try to reverse the course of the dollar by selling US $ 5,000 million “evaporated” and Forecasts point to the dollar remaining above $900 until the international and local scenario clears up. In fact, the great doubt that circulates is when the Central Bank is going to intervene to stop the advance of the greenback.
Throughout this scenario, the money tables of financial institutions have also been privileged witnesses of movements in the exchange rate. These units are vital. Its job is to be the contact center and quick closing of transactions in the money market, titles and securities.
The general manager of MBI Corredores de Bolsa, Cristóbal Vogel, says that the forex business -which is the purchase and sale of currencies- “It took a lot of strength from the social outbreak. People in Chile saved in UF and had very little of their portfolios in dollars, unlike Argentina for example”.
It details that this situation has changed since 2019, and dollar outflows have intensified since then. According to data from the Central Bank, Until March of this year, capital from Chilean households and companies has left the country for US$19.2 billion.
Vogel mentions that “with the increase in uncertainty since the change of government and the evolution of the discussion of the new Constitution, these flows increased even more.”
In June, the exchange rate rose almost $100. The executive points out that “in recent weeks we have seen how the fear of a possible global recession has impacted commodities, and copper has not been the exception. The sharp drop in its price directly impacts the exchange rate in Chile and injects it with the volatility that we have seen throughout June; this added to possible changes in capital market taxes, have been the fuel that generates the depreciation of the peso by regarding 15% during the month”.
He points out that “with this uncertainty, the volumes and risks of the business increase. The control of guarantees is fundamental in this market volatility”.
To the bank
Bci’s trading manager, Michel Oliger, indicates that they have noticed “increases, by some clients, especially exporters, who have been hedging their budgets, which has implied a slight increase in daily transactions ”.
In Banco Security they say that when the dollar came within moments of breaking the $830 barrier on Wednesday, its money desk saw an increase in trading volume compared to the daily average for the month. Even so, the firm puts cold cloths: “We have not observed significant changes in the volumes traded; in the month of June the average daily volume has been similar to that of previous months”, he maintains.
The preparations
From Banco Security they assure that they have a prepared and flexible structure to face the different market situations that may arise in the coming days.
Oliger points out that one of the advantages in Chile is that “We are with the same time as New York, so it has not been necessary to change the schedules to address the demand.”
Along these lines, Vogel shows that the market operates with relevant volumes between 8:30 and 14:30. However, he points out that the home office allowed clients to operate during less usual hours, so executives are more available than before and even following the busiest hours.
Risk coverage
The partner of NetGO -a firm specialized in designing and implementing solutions so that companies can control their exchange risks-, Francisco Matthews, points out that companies must protect themselves.
“I would recommend that you take advantage of reviewing how the strategy worked in a scenario of a significant devaluation in a short period of time. It is a good opportunity to refine the strategy”, she raises.
For those companies that do not have a roadmap, It states that they must design a strategy with a long-term vision so that a situation like this does not surprise them once more. Additionally, it advises not to “operate with derivatives out of fear, without first having a calmly defined strategy”.
Can this backdrop stress a company’s finances? Depends. Matthews distinguishes that this will be subordinated “to the margin and the speed with which increases in the exchange rate can be transferred to prices. Companies with low margins, with high debt in dollars, might perfectly sacrifice the expected profit for the year for this devaluation”.
Given the upward path of the dollar, he maintains that companies “must have good market data so as not to pay very high spreads, and on the other hand have good data on their exposure to manage it properly.”
