The US dollar finished 2007 with an accumulated loss of 6.65% against the Chilean Peso which was boosted by the strong international price for copper, Chile's main export, and the favorable interest rates differential with the US, according to Santiago analysts.
On the last day of operations the US dollar in the Santiago spot market was operating below 500 pesos in the range of 496/497 pesos. "The peso appreciated partly because of the copper surplus, mainly until last September and then was toned down by allowing those surpluses to remain overseas and allowing local companies to pay taxes in US dollars", said Eduardo Orpis an economist from a Santiago financial advisory consultant. In the first eleven months of this year, copper shipments represented 35.7 billion US dollars for Chile, of which almost a third are saved in reserve funds. But from September on what pushed the Chilean peso was the interest rates differential with the US. "Interest rate in Chile continued its moderate higher tendency, while the Federal Reserve because of the sub-prime crisis and credit crunch was forced to lower rates", added Orpis. The US basic rate now stands at 4.25% in an attempt to avoid a recession risk in the world's largest economy. The Chilean economy threatened with inflation, primarily because of energy prices, has forced the Central Bank to increase the reference rate to 6%. "This makes the Chilean market more attractive for foreign investors, and thus capitals begin moving into Chile and pushing the US dollar price down". In the 90 days future market the US dollar keeps loosing strength against the Chilean peso to the rate of 1.1 to 1.6%.