Chile Central Bank Sells $55 Million in FX Forwards at Average CLP 950.57

Chile Central Bank Sells $55 Million in FX Forwards at Average CLP 950.57

On June 19, 2025, the Central Bank of Chile sold $55 million in FX forwards, securing an average exchange rate of CLP 950.57 per USD. This transaction is part of the bank's broader strategy to manage foreign exchange risks and stabilize the peso.

The FX forward contract allows the Central Bank to lock in the exchange rate for a future date, providing certainty and minimizing currency risk. This move comes amidst elevated global economic uncertainty and robust domestic economic performance [2].

The average exchange rate of CLP 950.57 per USD is slightly higher than the current spot rate, reflecting the bank's expectation of a slight depreciation in the peso. The pricing of the contract is determined by the exchange spot price, interest rate differentials between the two currencies, and the length of the contract [1].

The Central Bank's decision to sell FX forwards is part of its broader monetary policy strategy. The bank has maintained the monetary policy interest rate at 5.00% since its June meeting, citing strong wage growth and domestic inflation above the target range [2]. The bank has suggested that it may cut rates in the coming quarters as inflation is expected to fall later in the year.

This transaction underscores the importance of FX forwards in managing currency risks and ensuring stability in the financial system. As the global economic environment remains uncertain, such measures become increasingly crucial for central banks.

References:
[1] https://www.chathamfinancial.com/insights/what-is-an-fx-forward
[2] https://www.focus-economics.com/countries/chile/news/monetary-policy/chile-central-bank-meeting-17-06-2025-central-bank-of-chile-leaves-rates-unchanged-in-june/