Real exchange rate rebounds, reversing early-2026 appreciation
Recent dynamics
Chile's TCR moved through a broad range during 2025. The index started the year at 108.13, fell to 101.61 in March and then recovered to 106.33 by August before weakening again toward the end of the year.
The appreciation trend intensified at the beginning of 2026. The TCR declined to 98.78 in January and 97.80 in February, its lowest observation in the recent period. Because a lower TCR represents a real appreciation of the peso, this movement implied tighter relative price competitiveness for Chilean producers exposed to external markets.
That movement subsequently reversed. The index rebounded to 102.40 in March, remained close to 102 through June and then rose sharply to 105.03 in July. The July increase represents a monthly rise of approximately 2.8%.
Despite the strong short-term rebound, the annual comparison remains almost neutral. The latest level is only marginally above the 104.97 recorded in July 2025, leaving the TCR broadly unchanged from one year earlier.
Interpretation and economic signal
The recent increase in the TCR represents renewed real depreciation of the Chilean peso. In relative-price terms, this tends to improve the competitiveness of Chilean exports and of domestic producers competing with imported goods.
The rebound is meaningful because it reverses much of the sharp real appreciation observed at the beginning of 2026. From the February low to July, the index increased by roughly 7.4%, restoring the TCR to levels close to those observed during the middle of 2025.
The annual comparison nevertheless argues against describing the latest move as a persistent depreciation trend. With the index essentially unchanged from July 2025, the current signal is better interpreted as a reversal of early-year appreciation than as a structural shift in Chile's real exchange rate.
The TCR also reflects more than movements in the nominal peso. It combines the nominal exchange rate with external prices and Chilean consumer prices, meaning that changes can arise from domestic inflation, foreign inflation or nominal exchange-rate movements, as well as interactions among those factors.
The 1986=100 base should therefore be treated as an index reference rather than an estimate of equilibrium or fair value. A level above 100 does not by itself imply that the peso is undervalued; the direction and persistence of changes are more informative for cyclical analysis.
Conclusion
Chile's real exchange rate has rebounded materially from the lows reached at the beginning of 2026. The latest reading of approximately 105.03 points to renewed real depreciation and a recovery in relative price competitiveness.
The short-term change is notable, but the broader signal remains balanced. The TCR is almost unchanged from a year earlier, indicating that the recent increase has primarily reversed the appreciation seen in early 2026.
The current signal is therefore one of normalization toward mid-2025 levels rather than a confirmed long-running depreciation trend. Further sustained increases would be needed to establish a clearer shift in Chile's real exchange-rate environment.