The brake on the blue dollar: what the Government did and what it will do | Speculation, rumors and measures in progress

The The blue dollar deflated 16 pesos this Monday to close at 322 pesos. In this way, it moves away from the peak of 350 pesos reached on July 22 last. Cash with settlement, meanwhile, remained at levels close to 326 pesos. The Central Bank was able to buy dollars in the exchange market for 55 milliondespite the demand for energy purchases that implied an outflow of foreign exchange for more than 100 million dollars.

Exchange speculation, which caused an increase in financial and blue prices of almost 100 pesos in just under 30 days, offered a breather at the beginning of the week. The moderation was accompanied by a strong rebound in the price of shares in the Buenos Aires stock market, that rose more than 7 percent in some cases, and of sovereign bonds. The country risk fell half a point to levels of 2957 units.

Rumors and speculation

From the market, however, they keep the bets recharged for a strong devaluation of the official exchange rate, taking advantage of the difficulties to accumulate international reserves, in months in which the purchase of energy is high and the field liquidates less. Added to the latter is the fact that the significant exchange rate gap further enhances the non-liquidation of agriculture.

In this climate of strong speculation, rumors and noises of different kinds circulate, not only linked to politics but also to the economic policy options that could be implemented. From more increases in interest rates in pesos, an increase in placements of future dollars and more controls on imports and tourism, to the possibility of an exchange rate split or a change in the monetary regime. Every day a new rumor circulates.

The measures that are already underway

The economic team, beyond adding instruments, has a battery of measures underway to overcome the pressures of the coming weeks. Last month tools focused on foreign exchange regulation were announced (controls on the purchase of foreign currency for non-essential goods, more tax on the demand for foreign currency from tourism, and greater flexibility to access foreign currency to strategic sectors for production). Also in guaranteeing the stability of bond prices in local currency, with the launch of instruments such as the put option for titles in pesos and interventions in the secondary market.

For the market, the million dollar question is whether they will be enough. What is usually mentioned in the reports of the city is that the Government will try to go until August (or September) without devaluing. This is because at that time the seasonality changes, that is, the extraordinary demand for energy dollars decreases, at the same time that the liquidation of foreign currency for the fine harvest accelerates again.

In September, however, the economic team will also face new challenges because significant debt maturities in pesos accumulate. At this point, the recovery of titles such as the tx26 adjusted for inflation was important. This Monday it rose 0.8 percent and accumulates a rise of 26 percent so far this month. He had been one of the hardest hit by the bullfight in mid-June. The strong rise in Merval shares at the beginning of this week, in which companies such as YPF rose 7 percent both on the Buenos Aires stock exchange and on the New York market, also generated some relief. Sovereign bonds in foreign currency were traded with increases of up to almost 2 percent.

The eyes on Silvina Batakis’ trip to the United States

The economic team did not make announcements on the first day of the week, despite the rumors of recent days, after the meeting between President Alberto Fernández and Vice President Cristina Kirchner last Saturday, and the meetings of the head of the Central Bank, Miguel Pesce , with the Minister of Economy, Silvina Batakis, before the Treasury Minister’s trip to Washington.

Batakis met this Monday with the head of the International Monetary Fund, Kristalina Georgieva, after having met with David Lipton, advisor to the head of the Secretary of the Treasury, Yanet Yellen. These meetings not only sought to convey the status of the local macroeconomy, but also to recalibrate some of the goals agreed with the Monetary Fund due to the effect generated by the outbreak of the war in Ukraine.

The jump in inflation since March, and its acceleration in recent weeks due to the run against bonds in pesos, which later led to the adjustment of financial dollars and the attempt to force a devaluation of the official dollar, is one of the points where the concerns are concentrated. The economic team considers that avoiding a devaluation of the wholesale exchange rate is key to being able to rearrange the price situation. Analysts agree that a sharp jump in the wholesale dollar could spiral inflation.

Leave a Comment