Is it another consequence of the Massa effect?

After a July in which this square anticipated an imminent sharp devaluation, the announcements of the new minister seem to have calmed it

By Pilar Wolffelt

05/08/2022 – 3:25 p.m.


At the beginning of July, an upward trend began to be seen in the evolution of future dollar rates, a market that serves as a safeguard against devaluation for companies and is, at the same time, a thermometer of what may come for the evolution of the US currency. But, After the swearing-in and the first announcements of Sergio Massa as the new Economy Minister, the rates in that market reacted downwards, especially in the longest positions towards the end of the year.

From Ecolatina, the economist Juan Pablo Albornoz explains that “indeed, a decompression of implicit rates was seen.” For example, the contracts as of September and October of this year showed effective annual rates of almost 170% at the close of Wednesday and this Thursday they closed around 140%.

Future dollar: does it indicate that there will be no devaluation?

Regarding the reasons for this trend, the expert economist in capital markets Christian Buteler tells iProfesional that this drop in the rates of future dollar contracts “can be read as something positive because it means that investors began to believe that there will not be a strong devaluation jump”.

For the economist Camilo Tiscornia, from CyT Economic Advisors, meanwhile, “this drop in rates may be related to an intervention by the Central Bank (BCRA) seeking to contain the evolution of the dollar“.

It is worth mentioning that this market is tied to the evolution of the official wholesale dollar and it is an operation in which two parties agree to buy or sell currencies at a previously agreed price and within a certain time. The contract has an underlying asset, which is the amount of dollars stipulated for the amount of the operation, a valuation (that of the official wholesale dollar according to Communication “A” 3500 of the BCRA) and guarantees, which can be dollars, shares, Cedears , bonds or Mutual Investment Funds.

That’s why, It works as a hedge against a devaluation and when the devaluation expectation drops, operators usually sell contracts and close positions that they had opened at another time, as can be seen at this time reflected in the dynamics of the contracts.

The future dollar is a thermometer of the price expectation for the US currency.

The future dollar is a thermometer of the price expectation for the US currency.

Is Massa’s arrival having an effect on the dollar?

The behavior of the future dollar would be in line with the response that Massa gave in the framework of the first press conference as Minister of Economy when asked about the monetary policy that will be followed in terms of the price relationship between the peso and the dollar.

In this regard, he said emphatically that there will be no abrupt devaluation of the currency. He explained that this decision lies in the fact that “The only thing that devaluation shocks produce is poverty and an enormous transfer of resources“.

And, thus, it shattered the expectations of many sectors, which recently speculated on such a measure.

Nevertheless, from the BullMarket Brokers Research team point out that this decline in contracts, which was seen mainly in the longer maturities, is due to the fact that the market between Wednesday and Thursday “was expecting some statement from the Central Bank or some news of a split and , as this variable did not occur, the contracts began to lose rate”.

And Albornoz also pays for this look by noting that, “current rates remain at very high levels“, so perhaps it is still too early to read this drop as a substantial relief in the expectations of depreciation, especially considering that, in the spot market (that of the stock market dollars), the Cash With Settlement dollar (CCL ) and the MEP rose this Thursday around $6 pesos each.

Thus, although everything would indicate that perhaps the future dollar market is reflecting at this time that investors have not yet validated a discreet jump of the official, more specific definitions are still needed for this to become an even more credible reality.

Massa's measures were in a good way, but definitions are still lacking.

Massa’s measures were in a good way, but definitions are still lacking.

Future dollar, waiting for more definitions

“And it is that the reading of the future dollar cannot be done in only one direction. Perhaps it is telling us that those who operate that market interpreted the foreign exchange announcements as more of the same, which may imply more future restrictions or a potential new unfolding of the exchange rate, which ends up making hedging against evolution less attractive. of the official dollar,” warns Albornoz.

That said, everything would indicate that the definitive trend in the dynamics of the future dollar will be consolidated with the passing of days, as it is seen how the Government advances with the measures tending to recompose the dynamics of dollars of the Central Bank (BCRA ) and that will confirm -or not- the discouragement of a devaluation expectation on the part of the operators.

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