On Thursday, July 14, the central bank (BCCh) announced a USD 25 bn foreign exchange intervention to support the CLP after it plummeted to a record low, reaching CLP 1,049. The program includes spot dollar sales of up to USD 10 bn; foreign exchange hedge sales to the same amount, and a foreign exchange swap program to provide liquidity of up to USD 5 bn.
While the central bank program is consistent with what we had expected (see our Latam Flash June 22), in our view, this intervention comes too late (see our Latam Daily July 12), following several days of considerable volatility and sustained exchange rate depreciation. Looking ahead, in a scenario in which CLP depreciation continues, limited time-bound micro-macroprudential measures may be necessary to limit the excessive appetite for assets denominated in foreign currency.
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