A debt swap in pesos that left a bitter taste, the bleeding of foreign currency from the Central Bank and a more adverse international context make up a more complex scenario that will put upward pressure on the blue dollar and financial currencies listed on the stock market, Cash with Liquidation and MEP.
In addition, the analysts state that the IMF statement stating that technical personnel from the organization and the Argentine authorities reached an agreement at the technical level on the fourth revision of the current program, for which a disbursement of some US$ 5.3 billion is expected and the easing of the reserve goal may “bring some short-term relief, but “it is insufficient” to decompress the exchange rate front “ since “the pressure will continue” due to the lack of dollars that will cause the drought.
Some in the market even anticipate that As Argentina promised not to use reserves to intervene in financial dollars -according to the IMF statement- “this may give them more room to continue on the upward path”.
Within this framework, some analysts believe that The blue dollar could reach the $400 barrier this month, and the CCL is on the rise Given that they estimate that due to the stock of pesos in the economy, the theoretical value of the currency is well above $400.
Parallel dollars: the reasons for overheating
The blue dollar started the week bouncing $4 to close this Monday, March 13 at $377, while the CCL on the day touched $400 but then fell back and ended at $395. The rise of the informal dollar occurred in a day in which the BCRA continued to lose foreign currency by registering a negative balance of US$87 million due to its intervention in the exchange market, with which so far this month the red has added some US$404 million.
The finance and agribusiness specialist Salvador Vitelli stressed that The monetary entity has net sales of US$ 1,490 million so far this year and highlighted that “it is the worst start of the year (with stocks) in accumulation of foreign currency by the BCRA.”
The blue dollar rebounded $4 on Monday to close at $377 due to a mix of local and international factors
On the reasons of overheating of free dollars, the financial analyst Christian Butler held that “This is an electoral year and every electoral year the portfolio is dollarized and what better than to start when the dollar is calm, cheap, the rest of the variables moved much more than the dollar, I see it as a natural movement”.
“Prices were perceived as cheap in the face of 6% monthly inflation, with a strong issuance of pesos, the rest of the variables kept moving and the dollar was quite quiet, it was logical that at some point that calm was going to end,” argument.
According to his vision, “What we are seeing is part of the market that, before prices began to rise aggressively, is now beginning to dollarize, There are several data that have not been positive, such as the debt swap, the fiscal result of last month, the level of activity that is still weak”.
The analyst remarked that the fact that the informal dollar “which previously had been above the CCL, has been trading below that financial currency in recent days, is showing that there is white money that is going to the dollar, there is a greater demand It’s genuine that a lot of that is coming from investors starting to switch to dollars.”
Parallel Dollars: The International Seasoning
the economist Natalia Butterfly attributed the rise in the blue and recent rebound in financial dollars to “the bankruptcy of Silicon Valley Bank in the United States” since “beyond the fact that the Fed has come out to rescue savers, the truth is that it is a negative sign for international markets on the bubble that was created as a result of the injection of liquidity in 2020”.
“Hoy there is some fear of a crash like that of 2008. Given this scenario, and given the vulnerability to which our country is subject, capital takes refuge in safer assets such as the blue dollar,” he pointed.
Analysts link a rebound in parallel dollars to a complex international scenario due to the bankruptcy of Silicon Valley Bank
Likewise, Motyl said that “(the head of the FED, Jerome) Powell anticipated that monetary policy could be more restrictive to lower inertial inflation in the USA, which ended up affecting the value of local assets, generating a greater drop in demand Of weight”.
In tune, the economist Federico Glustein assured that the upward trend of free dollars “It is directly related to what is happening in the United States and the fall of fintech banks mainly that it also dragged down the rest of the banks and financial groups. “The local stock market fell, with bonds trading low, stocks falling sharply and country risk rising by more than 4%, therefore, there is greater demand for the dollar than on other occasions,” he said.
For his part, Calves linked the rise in the blue “to the rebound that the MEP and the CCL had in recent days” and agreed that “The international context put emerging economies in checkIt affected the bonds that fell sharply, the country risk advancing significantly and that hits the dollars.”
Parallel dollars: can easing the reserve goal calm the exchange rate front?
The Government agreed with the IMF a reduction of almost US$2,000 million in the goal of accumulation of international reserves for 2023 due to the effect of the drought on exports.
Regarding the IMF statement, Nery Persichini, a strategist at GMA Capital, assessed that “when addressing the exchange rate policy, there is no explicit criticism of the stocks or the multiple exchange rates, but now there is an official commitment not to use reserves to intervene in parallel markets”, and opined ” perhaps the biggest novelty is the request to the Board of the IMF to relax the foreign exchange accumulation targets in order to consider the impact of the drought”.
Asked if it is enough to decompress the exchange rate front and calm the parallel dollars, Persichini judged that “Not breaking with the IMF is always good news, but I don’t think this program will work effectively as an expectation anchor when the macro continues to slip every day or as we enter the run-up to the election.”
The Government agreed with the IMF a reduction of almost US$2,000 million in the goal of accumulation of reserves
of the same gaze, Sebastian Menescaldidirector of Eco Go, stated that “to the extent that it will allow it will be tempering the adjustment that should be made in imports (given the drought), pay the debt to the IMF and avoid having to make an exchange adjustment”.
“But lowering the reserve target would not be enough to still have to continue rationalizing” the exchange rate policy by restricting access to foreign currency through SIRAs, and It would also be insufficient to decompress the exchange rate front and calm uncertainty”. And he highlighted: “We think that with the drought and the payments to the IMF, the supply of foreign currency would fall by more than US$20,000 million.”
Glustein He considered that the announcement of the easing of the reserve goal could “slow down the inclination towards the dollar a bit, but it must be taken into account that due to the drought and frost there is a lack of foreign currency, there is demand for imports, savings, investment and there are no dollars , the IMF and its light perspective do not move it to the market, but how to finance the activity to avoid brakes”.
At the same time, Juan Pablo Albornozan Invecq economist, argued that “the reduction in net reserve targets was to be expected with the enormous deterioration in the harvest expectation of the main export crops, soybeans and corn.
On the other hand, according to the statement Argentina promised not to use reserves to intervene in financial dollars (the buyback). This may give more room for financiers to continue on the upward path, even more so considering that they were relegated“, he predicted.
For his part, Emiliano Anselmi, PPI analyst asserted that the agreement with the IMF “does not change much” the panorama “because it was something that the market already incorporated”, and stressed that “It is a program that does not anchor anything because they are constantly modifying the goals”, which is why he believes that “it does not contribute to clearing the exchange rate front or calming uncertainty because credibility is already broken”.
Harvest projection worsened due to drought, which will cause “greater loss of foreign currency and will put pressure on free dollars”
Parallel Dollars: Will They Keep Rising?
For bottler, is positive “have an agreement with the IMF to modify the reserves goal, but I don’t see that this can stop (the exchange rate tension) because the lack of dollars is the same, and it is a problem beyond the goal, because they are dollars that you need to import Therefore, it does not seem to me that due to the easing of this guideline, the (parallel) dollars will stop rising.”
Glustein foresees that beyond the easing of the reserves goal, “Undoubtedly, the exchange rate pressure will continue because due to the drought, approximately US$18,000 million will stop entering, around 3% of GDP, so the IMF disbursement allows the pressure to be temporarily loosened but does not fill the gap produced by this natural phenomenon”
Within this framework, Glustein estimated that he estimated that towards the end of the month the CCL “would be close to $400 and the Blue between $380 and $390but with the demands of importers, the productive sector itself that demands intermediate goods and with a notorious exchange rate delay, the expectations about the prices are that they will shortly make a small jump to accommodate the local inflationary context and lack of reserves “.
Butterfly projected that the blue “this week could exceed $400” while “the dollars will continue to rise to $410-$415 by the end of the month” and listed among the factors that will drive them to “the drought that anticipates a lower inflow of dollars and, therefore, less support for the peso, in addition to the greater outflow of foreign currency for imports in a context in which the economy has been four years stagnant months”
“One estimates that they will facilitate access to foreign currency for the private sector, as in fact has been recorded in recent weeks, added to the need to import energy in a time of high temperatures, this hinders the level of reserves and pushes demand up dollars for coverage,” he stated.
In addition, Calves He stated that “many variables tell us that the CCL has a certain upward path, especially if the international context continues not to accompany it.” And he specified that “The monetary variables indicate that (the theoretical value) of the CCL would give $460”. According to his vision: “when the IMF board formally approves the fourth review of the agreement, US$5.3 billion will be disbursed, which is undoubtedly a relief for the BCRA, but that is barely a quarter of the dollars that will be lose due to the drought, that is, it can provide some relief, but not much, I don’t see it as a factor that can calm the uncertainty, it may be in the short term, but not in the long term.”
