The Central Bank has already used 85% of the exposure quota in foreign exchange futures that it has enabled

The Central Bank (BCRA) increased its exposure in local foreign exchange futures markets by 62.3% in July to avoid a greater overflow of devaluation expectations: raised it from the US$4,358 million it showed in June to US$7,072 millionas confirmed yesterday when updating your balance data.

It was the cost that it had to face in the midst of the nervousness caused by the crisis of the ruling party, in the midst of a spike in inflation and a sustained loss of reserves.

Thus, the “broad foreign exchange intervention of the BCRA rounded off sales of about US$4,000 million in July, considering the intervention for US$1,300 million in the cash segment and the equivalent of US$2,700 million in futures, figures that represent a record since August 2019″, the economist Adrián Yarde Buller, from Facimex Valores, observed in a report.

The amount of interventions on futures also implies a new record in times of the Fernández administration, since it far exceeded the “peak” of US$5,683 million that it had shown in October 2020 (when the exchange rate gap had shot up to 130%)” and even more so to the “US$5,151 million registered in November 2021 during the legislative elections”, Portfolio Personal Investments (PPI) noted today in a report.

But it remains well below the maximum it had reached in February 2016, (when it was US$10,982 million) and even further from the record equivalent of US$17,487 million that it reached in November 2015, a month before the change of Government. , after the exorbitant intervention on that square carried out by the former president of the BCRA, Alejandro Vanoli.

X-ray of the official strategy to attack devaluation expectations

With everything, The BCRA closed that month with a position that was barely 27% below the limit equivalent to US$9 billion imposed by the agreement signed and in force with the International Monetary Fund (IMF). “The position sold for US$7,072 million in reference dollar futures (”A” 3,500) was very close to the legal limit of US$5,000 million and US$4,000 that is stipulated as a ceiling in Rofex and the MAE, respectively, according to the goals contemplated for the second semester in that agreement”, warns the Facimex Valores report.

The oxygenation that the Government achieved with the change in Economy, and the announcement of a turn towards orthodoxy, would have helped that exposure to be reduced by 11.6% during the current month. “According to our estimates, the BCRA’s short position would have contracted to US$6.25 billion so far in August,” they estimate in PPI.

“Foreign exchange pressures seem to have eased a bit in August, probably due to the increased supply of hedging instruments after the last debt swap. But there are factors that warrant caution in the coming months, since net reserves remain at critical levels, the demand for coverage remains high, the real exchange rate is at its lowest since May 2018, and the exchange rate gap continues to widen. around 120%”, they limit.

defying limits
defying limits

The striking fact is that the implicit rates in Rofex futures contracts continue at extremely high levels (the annual nominal rates start at 95% and reach up to 105% for contracts to expire from September to July 2023), although those of the position to be settled at the end of the current month (the contract with the highest volume traded) have fallen by 21 points in recent weeks to stand at 61.5% per year.

“We believe that the following effects are at play behind this sharp contraction in August’s implicit rate: a) persistence of BCRA intervention in the short part of the futures curve; b) the cessation of sales of reserves in the MULC -accumulates a positive streak of nine rounds for a total of US$289 million-; c) growing expectations of an exchange rate split -the official Deputy Minister Gabriel Rubinstein had it in mind, according to his statements before becoming an official- which, if it were to happen, would make the future of the dollar sterile as a hedge (since the “A” 3500 would be the commercial)”, they explain.

The official exposure in futures was one of the data of a foreign exchange session that once again showed the BCRA trying to fit the size of the demand to that of the supply of foreign currency so as not to have to give up what it lacks.

In this way, he managed to raise another US$6 million for his interventionsin a round in which US$235.7 million were traded in the cash segment, and closed the tenth consecutive day with a positive balance (a period in which it repurchased some US$290 million, slightly less than 35% of what it had sold in the month), although it slowed down the rate of exchange rate adjustment again, since it allowed the wholesale dollar to advance by just $0.20.

Thus, “in the first three days of this week it rose 98 cents, against an increase of $1.16 in the same period of the previous week,” said operator Gustavo Quintana.

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