Barclays reports that the Chilean peso has lagged recently as the once-prominent artificial intelligence narrative receded and as Chile’s status as an oil importer has weighed on external balances. The bank highlights a deterioration in the current account balance over recent months and says lower oil prices could provide short-term relief if they materialize.
In its assessment, Barclays points to disappointing copper production as a key reason for weaker export performance. The firm notes that if production fails to keep pace with demand, which it describes as structurally high amid the AI build-out, copper prices should ultimately adjust to reflect tighter market conditions.
Barclays also emphasises the role of interest-rate dynamics. With expectations in the U.S. for rates to remain higher for longer, the bank views carry as low for the Chilean peso. This low carry, in Barclays' view, is likely to limit the currency’s ability to rally substantially in the near term.
Looking further ahead, Barclays expects fundamentals to become more important. The firm continues to forecast a multi-year investment cycle in Chile and believes the country can absorb the current shock provided the central bank acts prudently. In such a scenario, Barclays would expect the exchange rate to improve if a sustained resolution in the Middle East leads to lower oil prices.
Barclays reiterates that the recent deterioration in Chile’s current account is linked to its oil imports. The bank’s analysis ties together weaker copper export receipts, higher oil import bills, and a lower carry environment as the main forces behind the peso’s underperformance to date.
Context and implications
- Commodity markets: Lower copper exports stemming from production disappointments reduce foreign currency inflows for Chile and are central to Barclays' view.
- FX and rates: Limited carry relative to U.S. rate expectations constrains the Chilean peso’s near-term upside.
- Energy trade: Chile’s oil imports have contributed to a worsening current account, making the peso sensitive to oil-price movements and geopolitical developments.