The Chilean peso surged to a 20-month high on Tuesday, falling below $900, as markets reacted to signals from U.S. President Donald Trump suggesting a potential swift finish to the conflict with Iran. The dollar-peso parity dropped $24.3 to $891 at close, nearing its lowest point since November 14, 2023, according to Bloomberg data.
The Chilean peso was the best-performing emerging market currency, followed by the Peruvian sol and the Colombian peso. The dollar index fell 0.4%, despite rising interest rates in the United States, contrasting with significant declines in Europe.
“Markets are much calmer following President Trump’s statement that attacks on Iran will end ‘very soon,’” wrote Scotiabank Global strategists Shaun Osborne and Eric Theoret. “That remains to be seen, as it is unclear whether the bombing campaign has achieved U.S. Objectives at this point.”
Jorge Concha, an FX trader at Banco Bci’s Sales & Trading desk, added, “The main driver now is the Iran issue. That is fundamental, and what is happening now is a decompression of this conflict, but it comes more from expectations. We also have in Chile the potential implementation that could occur after this somewhat turbulent transition between the outgoing and incoming governments.”
Brent crude oil futures plummeted 10.2% to $88.9 per barrel, significantly down from the $120 reached earlier in the week, and most global stock markets rose. Meanwhile, Comex copper rose 1.4% to $5.93 per pound, supported by the generalized weakness of the dollar.
Scotiabank analysts noted “tentative indications that the early February rally in confidence about the global dollar is at least moderating. Data suggest that real money accounts took advantage of the early March rally to unwind more overweight positions, which could be a further signal that markets are now looking past near-term geopolitical risks and refocusing on the long-term structural negatives of the currency.”
Markets also responded to unexpectedly strong Chinese trade data. Chinese exports jumped 21.8% year-on-year in January-February, well above the expected 7.2%, and imports grew 19.8%, versus a general estimate of 7%.
The Brent crude price briefly fell to levels of $80 in the afternoon, after U.S. Energy Secretary Chris Wright announced on social media that the Navy had escorted a tanker through the Strait of Hormuz. Yet, he quickly deleted the post, and Brent recovered those additional sharp declines.
Foreign investment in the dollar-peso parity had been closing at new 2026 highs just before Trump’s initial comments regarding potential resolution of the war. The energy shock generated by the crisis has particularly impacted expectations for Chile, an open economy that does not have large-scale energy production.
The net position of foreign agents increased by US$4.8 billion last week – during which the exchange rate rose almost $40 – to exceed the US$10 billion mark against the Chilean peso, according to data from the Central Bank, a level not seen since the first “dollar a luca” in 2022. Data from the Central Bank focused exclusively on dollar-peso forwards signed by non-residents show the current position is the most aggressive against the peso since August 2020 in net terms, and has moved due to a cross-adjustment in the various settlement deadlines.
“the carry trade plays a fundamental role in the offshore position for or against the Chilean peso. However, the unwinding and re-arming of these positions have also been influenced by fluctuations in the price of copper, the global strength of the dollar as a safe haven in the context of the US-Iran conflict, and the fiscal deterioration in Chile, giving it volatility depending on the strategy of non-residents,” observed Concha.
