Saturday, 15 Dec 2018

Copper sum 8th fall online due to trade war and takes the dollar to a maximum in 1 year

The price of copper continues to deepen its losses as the trade war between the United States and China advances and the questions it opens about the balance between supply and demand, as well as the impact of potential trade union conflicts that alter it.

Yesterday, the value of the red metal fell 1.42% to US $ 2.71 per pound, its lowest value since July 20 last year, when the pound was quoted at US $ 2.69 per pound. This, in turn, put pressure on the dollar globally, having an impact on Chile in an increase of almost $ 10 in the exchange rate, to $ 663.

The mineral thus chains a negative streak of eight consecutive days, in which accumulates a decrease of 6.28%.

According to analysts, its fall of 16.42% so far in 2018 responds to the effects of the protectionist measures that the US has announced about imports from China, the world’s leading copper consumer. In any case, experts predict that thanks to the supply of the commodity, its price could return to values ​​over US $ 3 per pound by the end of the year (see bottom note) .

The decline in copper in recent weeks has led to a strengthening of the dollar globally, boosting the exchange rate to values ​​that were not seen for more than a year. Yesterday, the exchange rate in the local market closed at $ 663, an increase of $ 9.6, its highest increase since November 20 last year, when it rose $ 10.7 after the first round of the presidential elections. So far this year advances $ 48.6.

Patricio Roncagliolo, deputy manager of Itaú’s corporate money table, said that structurally what justifies the strength of the dollar are the prospects of rate hikes by the Federal Reserve of the United States. Roncagliolo said that “in the last two months, this upward pressure has been enhanced by commercial tensions between the US and China, which have resulted in the mutual imposition of tariffs that threaten growth (especially in China) and that have negatively impacted the price of copper. ”

One of the questions that arise from the volatility that both the copper and the dollar have shown is whether they will remain at current levels. The economist of Bci Studies Antonio Moncado foresees a transitoriness in his values ​​and assures that they have a short term character, which will tend to revert in a reasonable time. “We do not see permanence in current levels in any way because the current level of exchange rate responds rather to scenarios that have been configured from what has to do with trade war and the greater risks associated with that situation. base scenario does not contemplate a type of change in the current levels “.

The Chilean peso was the seventh currency that depreciated the most against the US currency, with a fall of 1.39%, while within the emerging countries it was ranked as the second most affected. The first was the South African rand, with a 2% drop against the dollar.

Pedro Pablo Larraín, CEO of Sartor, said that the evolution of the dollar will depend on the solutions to commercial disputes. By the end of the year, it estimates an exchange rate between $ 625- $ 635, based on “a reduction in global uncertainty and a consolidation of favorable expectations for the national economy.”

Closing 2018
By the end of the year, most analysts estimate the exchange rate in a range of $ 620- $ 640.

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