Long BRL – Short CLP

We initiate this trade with an indicative level of 16 5 . 50 and a target at 17 1, with a stop on close under 162.60 . The rationale is driven mainly by a 1 - month positive carry of 0.8 %. We are going long the currency with the highest carry in the region (BRL) and short the currency with one of the lowest carry (CLP). A secondary argument is that BRL should be more resilient than the CLP to potential oil-price shocks if the US attacks Iran, given Brazil’s position as a major crude producer. Conversely, Chile is a net oil importer, so terms of trade would likely deteriorate if the ratio in oil/copper prices rises further. Since February 13 the ratio of oil/copper has gone up by almost 7% but it remains 25% below the recent 1 - year highest level.