Despite the jump in parallel dollars, the inflationary acceleration, and the drain on reserves due to sales by the Central Bank in the official exchange market to supply demand, the rate of adjustment of the exchange rate in April was below inflation.
The official exchange rate it was devalued in April 6.5% monthly (end to end) and 6.6% on averagewith which the rate accelerated compared to the 6% of March, and also compared to February and January when the adjustment had been 5.4 and 5.5% respectively.
Although in the last days of April before the run of the parallel dollars, the BCRA had accelerated the speed of the crawling peg, in the monthly average of the exchange rate It looks behind compared to April inflation, which would be in a range between 7.2 and 7.8%according to the calculations of private consultants.
This new delay occurs despite the fact that the IMF in the technical report of the fourth revision of the agreement emphasized the need to accelerate the crawling peg so that it reaches a positive real level and not lose competitiveness.
For economists, one of the main reasons why it is difficult to accumulate reserves is that the exchange rate is very behind. And although the BCRA already accumulated in May a balance of net sales of US$276 million due to its intervention in the official exchange market, and the stock of net reserves is in negative territory, according to private estimates, Analysts anticipate that this month the rate of devaluation will accelerate but that it would once again be behind inflation.
Official dollar: this is how May started
The official wholesale dollar closed this Thursday, May 4, at $225.70 and has accumulated an increase of $3.02 so far in May. Delphos Investment analysts noted that In the first three days of May, the Central Bank reduced the rate of devaluation to around 7.2% monthly after accelerating above 8% in the last week of April.
Despite the bleeding of reserves, the official dollar in April closed below the inflationary rhythm
Andrés Reschini, F2 Soluciones Financieras analyst stated that “In the three rounds that we have carried out in May, the official dollar has an average rate of devaluation of 7.12% TEM (Monthly Effective Rate).
The expert pointed out that “at this rate it would accumulate a rise of 7.8% month-on-month versus the 8.4% yield of the monetary policy rate for the same period.”
“I think they are going to go below the pace of the monetary policy rate as it has been happening,” Reschini estimated. And he alleged that “for now they are trying to keep up with the rate and the crawling goes below so as not to tempt to delay more settlements by leveraging the rate in pesos.”
In addition, Emiliano Anselmi, PPI Chief Economist highlighted that the BCRA “has been having a quite random (random) movement of the crawling peg, One day it moves very low, another day very high, it does not have a very defined trend”.
“The effective annual rate for the last 5 days is 130%, therefore it is below March inflation and also below April inflation. If you annualize March it is at 144% more or less, and if you annualize an April of 8% (inflation) you are at 152%, so now it is moving it below, but it is not clear where it is going to take it, ” pointed out.
Official dollar: will it match inflation in May?
Sebastian Menescaldidirector of Eco Go, commented that in the last days of April “the rate of devaluation had risen quite sharply, but it is not sustainable, because if they want to control inflation somewhat, they cannot continue raising it.”
They believe that the IMF could demand a further acceleration of the exchange rate adjustment in the framework of the renegotiation of the agreement
“It’s going to get back under inflation. If they manage to decompress the exchange market, and get more liquidation of the 3 soybean dollar, they will have air so as not to have to raise the rate of devaluation so much, and put it slightly below inflation“, he predicted.
in tune, Reschini held that “It is true that the issue of reserves is now much more delicate and the withdrawal of deposits has also been added, but for now I do not see that this brings a change in policy in the sense of matching inflation or a discreet jump”.
Instead, Fernando Baer, anticipates that the rate of devaluation will be kept high, not below inflation” and speculated that there could be “some IMF conditionality to speed it up even more if progress is made in a renegotiation of the agreement.”
The financial analyst Gustavo Ber, agreed that “it is probable that any advance of disbursements by the IMF requires, among other conditions, that the rate of slippage does not lag behind inflation in order to avoid accentuating the exchange rate lag, which puts even more pressure on the weak Bookings”.
for the economist Federico Glustein“The IMF undoubtedly demands a devaluation that the government cannot give as a result of an election that could be adverse to it, so it is more probable that the organization moderates this demand.”
For its part, the consultant Ecolatina He affirmed that the inflationary acceleration generates greater pressure to accelerate the crawling peg and evaluated that “the complexity imposed by the dollar front and the need to avoid a greater exchange rate appreciation leave little room for maneuver for the government to apply this year the traditional recipe electoral delay of the exchange rate”. However, he affirmed that “we do not anticipate that they will seek to undo the delay, but rather manage it, which will continue to generate an excess demand for foreign currency that will have to be compensated.”
A greater liquidation of the soybean dollar would give air for the BCRA to continue maintaining the crawling peg below inflation
However, the consultancy said that “we do not anticipate seeking to undo the delay, but to manage it, which will continue to generate an excess demand for foreign currency that must be compensated.”
Official dollar: what rate of devaluation do you foresee in May?
Ber I think that “To the extent that financial dollars appear calmer, even when this happens from interventions, the crawling-peg rhythm could accelerate converging towards inflation, possibly around a floor of 7%” According to his vision, the government “would still be looking for it to act as an “anchor” at least to try not to further accelerate the nominal economy, mainly given the speed of inflation and that it is an election year.”
For her part, the economist Natalia Butterfly argument that “the monthly crawling peg rate should accelerate to 7.5%, at least to reduce the gap with inflation and stop losing so many reserves in a context in which it is very difficult to accumulate dollars and the elections are approaching “.
However, the economist said that “I doubt that they will position it above inflation, because for them it implies putting pressure on the general level of prices, which is why they try to delay that impact.” Within this framework, she believes that the BCRA will validate an adjustment of the official exchange rate in May “in 7% since the Government tries to avoid very sudden jumps in the variables that end up generating a climate of greater volatility in the exchange market, despite the fact that this implies losing many reserves”.
And Delphi argues that “Given the inflation expectations, the rate of devaluation of the official exchange rate will not drop again below 7% per month on a sustained basis in the coming months
Likewise, Anselmi speculates that the final rate of devaluation in May “It’s going to be close to inflation, it’s not going to seek to delay it because it doesn’t have reserves.” As for the devaluation expectationsthe analyst indicated based on the price in the futures market, that “the most critical period is July-August, when forward rates are when they are highest.”
“The forward rate, which is like the one-month rate but seen since the end of July, is the highest, that is the one that marks an expectation of devaluation of 17-18% against 11% in previous months. But today they gave way very Strong futures. So that calmed down a bit in the medium term. It could probably be due to the expectation both that the IMF disbursement will be brought forward, which is a temporary and short-term improvement, and that a new dollar will finally come out soybeans,” he estimated.
