At the close of the week, alt-dollars fell from their highs and there was also profit-taking for stocks and bonds after the The Central Bank raises its rate by 1,000 basis points of reference, in an attempt to stop an inflationary escalation and the devaluation of the currency.
Since Wednesday, the Minister of Economy, Sergio Massahad urged a firm intervention in the bond market, with the intention of lowering the stock prices of the dollar below the threshold of $450, with the consent of the Monetary Fund International (IMF). Basically, the BCRA, which has public securities of the exchange in its assets, bought bonds in exchange for dollars, and also sold bonds in exchange for pesos. In this way, it pushed back the prices of public securities in pesos and pushed up those of the same bonds quoted in dollars, thereby reducing the parities of “cash with settlement” and the MEP dollar by more than 30 pesos.
Said operation was coordinated by the vice president of the monetary authority, Lisandro Cleri, Massa’s trusted man at Central. The fall in stock dollars was “transmitted” to the parallel market.
He free dollar, which had touched a nominal record of $497 on Tuesday at noon, ended on Friday offered to $469 for sale. In the week it recorded a gain of 27 pesos or 6.1%, which expanded to 74 pesos or 18.7% throughout April, while in the accumulated of 2023 it amounted to 123 pesos or 35.5%, due to above an estimated inflation of 31 percent.
The Board of Directors of the monetary authority unusually increased the yield of the Leliq (Liquidity Letters) to a 91% per year (TNA), from a previous 81% in its monetary policy rate.
Simultaneously and with the idea of boosting savings in pesos, the BCRA also raised the minimum guaranteed rate and tripled the taxable amount on fixed terms of individuals.
A yield of 91% TNA is equivalent to 140.4% as effective annual rate (TEA), compared to analyst projections that place annual inflation around 120% by 2023. A positive real rate It is one of the points agreed between Argentina and the International Monetary Fund (IMF) in a last agreement.
The soybean dollar scheme 3 is not contributing a significant volume of foreign currency when compared to the other two editions of the Export Increase Program in September and December 2022. For operations with agricultural dollars, USD 1,620.6 million were settled in April , while the BCRA registered in the fourth month of the year a balance in net favor of only $33 million for his intervention in the MULC. During the week, the monetary entity completed a net sales balance of USD 49 million, with sales in the last three operating rounds.
“The low levels of settlement through the Export Increase Program and the intervention in the parallel dollar market put pressure on the low level of net reserves of the Central Bank. The widening of the gap between the Agro Dollar and the cash with liquidation weakens the attractiveness of participating in the program, which added to the recent consumption of the few dollars that the institution has in its reserves -destined for the purchase of bonds in dollars with the objective of controlling the parallel dollar- worries the market and intensifies doubts about the future of the BCRA coffers”, evaluated the experts of the IEB group (Invest in Stock Market).
Martin Calveira, a research economist at the IAE of the Austral University, explained that “the situation accelerates its deterioration determined by the level of expectations and uncertainty in the framework of a process of great uncertainty. The deterioration translates into exchange pressures that will be transferred to the adjustment of prices in the economy. Price adjustments in high inflation do not respond essentially to economic factors, but to inertial behaviors in the face of lack of definition and inaction of economic policy”.
“In this context, prices are usually adjusted more frequently and the time horizons of the contracts are shortened, which is not to be expected given the inflationary acceleration. Indeed, the economy maintains a short-term bias in price formation and the behavior of agents is sensitive to overreactions”, added Calveira.
The BCRA also called for an acceleration of the “crawling peg” or controlled devaluation. The wholesale dollar closed April with a monthly rise of 6.5%, at 222.68 pesos. “In the week that just ended, the wholesale exchange rate rose 4.15 pesos (+1.9%), the highest weekly correction since August 2019.” So, the currency gap with the free dollar he stayed in 109.4%after highs of 125% on Tuesday 25.
“These measures, together with possible new incentives for supply and restrictions on demand, are added to the largest recent interventions that have managed to deflate financial and free dollars from the maximum, a respite that would seek to gain time to achieve genuine currencies and thus try to regulate the process of greater pre-electoral dollarization and greater issuance that would continue -beyond ephemeral respite- its course”, said the economist Gustavo Ber.
The turbulent days in the exchange segments did not alter the positive performance of Argentine shares, which continue to capture demand as a hedge before the elections. Only the sharp rise in rates led to a partial profit taking.
He S&P Merval of the Buenos Aires Stock Exchange ended with a winning balance of 2.4% in pesos, and 2.8% in dollars “counted with liquid” in the week. At 297,960 points, the leading panel was close to its nominal intraday record of just over 307,000 points. So far in 2023, the S&P Merval maintains a gain of 47.4% in pesos and 11.9% in dollars.
Bonds in dollars, the place where the Government intervened to stop the stock market dollars, ended up stabilizing in the weekly comparison (-0.6% average), although they ended April with an average fall of 4.4%, with more pronounced falls for bonds. short tranche titles (Global 2029 and 2030), with a monthly decrease of 7%. Among the public titles in dollars with local law, in April the Bonares 2029 and 2030 collapsed, which sank 10% and 12%, respectively.
He risk country of JP Morgan ended April in 2,656 points basic for Argentina, with a rise of more than 400 points in April. During the week the country risk advanced 44 units.
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