USD/CLP to retest the 840 level amid political risk woes – Credit Suisse

The Chilean peso was the worst-performing EM currency in Q3. Investors’ focus on political hazards is likely to intensify as the presidential elections (scheduled for 21 November) approach. This prospect exposes the CLP to near-term depreciation risk, in the view of strategists at Credit Suisse.

Vulnerable to political risks

“Though recent CLP underperformance means that some of the bad news is already in the price, we think there is scope for the upward move in USD/CLP to extend further if the candidate representing the left continues to raise his poll lead over the centre-right candidate.”

“We like being long USD/CLP and expect negative market-sentiment to lead to buying of USD/CLP until the elections, with every dip likely to be bought. A re-test of the end-Q1 2020 USD/CLP levels around 840 (about 3.4% weaker from current levels) is possible in this context.”