The Chilean central bank's intervention program is similar to one in 2019, but this time it has increased the potential size by adding a $5 bn preventive currency swap line. The intervention last time was trigged by domestic social protests whereas this time it is about global factors.
The CLP may gain at the open but after the initial reaction, markets will likely focus on the details of the program to see how far the central bank is willing to go. It will almost certainly not draw a "line in the sand" but could aim for a soft landing since most of the FX weakness comes on the back of weaker fundamentals.
If the intervention fails to steady the peso, it may need to turn to more aggressive interest rate hikes. Roque Montero remains CLP neutral and sees CLP rates underperforming BRL and MXN rates.- UBS Strategy
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