US Dollar surges in Latin America amid geopolitical tensions

The US dollar is experiencing significant strength across Latin American markets, driven by geopolitical instability in the Middle East and shifting US monetary policy expectations.

In Chile, the peso has faced intense pressure, with the exchange rate hitting its highest level in over a year. This volatility is linked to rising oil prices following Donald Trump’s rejection of an Iranian proposal to reopen the Strait of Hormuz, a critical maritime route for global oil transit. The combination of high energy costs and falling copper prices has further weakened the Chilean currency.

In Mexico, the peso has depreciated toward the 18-unit mark per dollar. Analysts attribute this to the narrowing interest rate differential between the Federal Reserve and Mexico, which reduces the attractiveness of carry trade positions. Rising US Treasury yields have also contributed to the downward pressure on the Mexican currency.

In Peru, the dollar has also seen upward movement, with official and parallel market rates showing increases. While the Peruvian sol has historically shown resilience, recent fluctuations reflect broader global trends and local market adjustments. The US Dollar Index (DXY) remains strong, supported by high US bond yields and labor market data.