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from large domestic pension funds and the recovery in the price of copper explain the relative resilience of the currency (Chart 70}. Given the low carry, CLP offers an attractive alternative as a funding currency as the portfolio rebalancing of pension funds is expected to slow down. We expect the currency to weaken further in 1Q17 as interest rates move higher in the US, and we do not expect the central bank to intervene, as it would likely be the case in Peru. In order to reduce the carry cost of the funding currency without losing the neutral exposure to metals, we like a basket of the Chilean peso with the Australian dollar. The Australian dollar is also highly correlated with commodities and China. We are bearish the AUD vs USD, as we expect the currency to weaken about 4% by end 1Q17. Bank of America Global Rates, FX & EM 2017 Year Ahead | 16 November 2016 41 Merrill Lynch HOUSE_OVERSIGHT_014771