PEN & CLP: Divergent Near-Term Outlook

The recent leg-up in copper prices, which our commodities team believes are likely to remain elevated over the near term, in theory bodes well for the Peruvian sol and Chilean peso. However, Peruvian authorities have recently resumed dollar purchases and introduced a plethora of measures designed to alleviate pressure on the currency after it gained over 1% in the first two weeks of 2011. As such, we expect the PEN to struggle to push much through the PEN2.7700/US$ level which has held since January 18, meaning near-term gains will likely be limited.

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