The blue dollar was on the brink of $500 this Tuesday -closed at a record $495- in a hectic day in which the financial currencies -Cash with Liquidation and MEP- also registered sudden jumps until the Minister of Economy, Sergio Massa, gave the order to the Central Bank to intervene in the bond market to lower them. For analysts, this measure will have an ephemeral effect in keeping parallel dollars stable.
When the value of the blue reached a peak of $497 at noon, and the CCL was trading at $482, Massa through his twitter account stated that the Government will use “all the tools of the State to order” the situation of the dollar and confirmed that the The government negotiates the disbursement agreement with the IMF to strengthen the reserves.
In that sense, Economists believe that if the IMF grants advance disbursements it will be in exchange for “very tough measures.”
For analysts, the skyrocket of the blue to almost $500 is no longer a price readjustment due to the delay that it showed with inflation, but rather a currency run in the midst of a scenario of uncertainty due to the fragile economic situation and the year electoral, an increase in the interest rate that was insufficient, and a meager performance of the soybean dollar.
In this context, some Economists consider that going out to intervene in the market through the purchase and sale of bonds can calm financial dollars in the short term but, as a counterpart, it generates greater mistrust, which could accentuate the withdrawal of deposits.
Soybean dollar: continues to be complicated by the rise in parallel dollars
An analysis of PPI also stated that “As the soaring of the hare dollars is exacerbated and the exchange rate gap rises, the chances of success of the soybean dollar are further reduced“. And they affirm that “there is no doubt that the difficulty of the BCRA to swell reserves will continue to worsen at the same time that the liquidations of the soybean dollar are diminishing.”
The blue dollar closed at a record of $495, after touching a peak of $497
In this context of greater exchange rate tension, the The Central Bank registered on Tuesday a net purchase balance of just US$41 million for its intervention in the single free exchange market (MULC). There was a slowdown in the pace of liquidation under the soybean dollar 3 that contributed foreign currency for u$s 61 millioncompared to US$106 million the previous day.
Thus the monetary entity extended the streak for the fourth day buyer and accumulates net purchases of US$230 million so far in April. Meanwhile, the amount liquidated by the soybean 3 dollar since its start-up amounts to US$1,450 million, below expectations, and the market does not believe that the target of US$5,000 million will not be reached.
The finance and agribusiness specialist Salvador Vitelli affirmed that dollar agro “It continues to be completely paralyzed and even more so with these fluctuations in the dollars, which adds uncertainty and the value of soybeans measured in free dollars does not stop falling due to the rise in the MEP and the blue”
Financial dollars: strong intervention of the BCRA
Given the escalation of free dollars, and after Massa’s tweet, market sources said that there were strong BCRA intervention to lower financial currencies. The financial analyst Christian Butler explained that the operation consists of going out to sell bonds in pesos and buying the same title in dollars with real dollars”Using reserves to intervene in financial dollars was restricted by the IMF.
“They came out to intervene strongly to lower the financial dollars,” said Buteler, who maintained that in this way they also seek to stop the escalation of the blue. And he added that “what they point to is that it be through financial dollars, which is where they can intervene, and for a matter of arbitration, the price of the blue falls.”
As a result of this intervention, the MEP dollar, which had reached a peak of $470 during the day, closed down 0.3% at $447.50. Meanwhile, the CCL ended around $466, after having recorded a high of $482.
The BCRA came out to intervene strongly in the bond market to lower the financial dollars
A report from the Libertad y Progreso Foundation stated that the CCL” climbed 14.6% so far in April and accumulates an increase of 528% during the administration of President Alberto Fernández; cWith this, it exceeded by 122 percentage points the increase accumulated during the entire government of Mauricio Macri (406%)”.
The Economist Federico Glustein pointed out that the governmenttries to intervene in the financial markets to derive a drop in the blue and stop the run“but he emphasized that “the fire power it has is nil” and maintained that “since it does not have a strong liquidation of agriculture, it needs fresh foreign currency to meet the demand.”
In this sense, Massa confirmed that the disbursement agreement with the IMF is being negotiated. And, later, the IMF ratified that it is rediscussing the plan with Argentina.
. About, Emiliano Anselmileader of the PPI macroeconomic team, assessed that “They can seek extra funds from the IMF, but if they obtain them, the organization will ask for something very harsh in return.”
Financial dollars: will intervention calm them down?
Andres Reschini, an analyst at F2 Soluciones Financieras, questioned the decision to intervene by buying and selling bonds using BCRA dollars in a context of scarce reserves: “That the BCRA is intervening with dollars will probably speed up the withdrawal of deposits”
And he stated: “It is a complicated situation. Because It is public knowledge that net international reserves are at a very low level and the fact that they spend them to lower the financial dollar, without a plan, only increases mistrust“. And he added that “Massa’s statements confirm that there is no measure in the pipeline that, under criteria of economic rationality, will calm down.”
In the midst of the exchange tension, the IMF confirmed that it is rediscussing the plan with Argentina
in tune, Glustein He assured that “the outflow of deposits is growing, there is a very high level of mistrust that deepens day by day” and considered that going out to intervene “is to burst bonds to lower the financial dollar today, but in the medium term it will have serious consequences”. And he predicted that “it is to calm down today and kick the problem and the effect will be short because there is not much credibility anymore“. However, he believed that “if the renegotiation with the IMF takes effect, it is likely that the parallel dollars will fall and stand at $470”-
Vitelli agreed that “in practice, the intervention of the BCRA is to get rid of foreign currency” and asserted that “it is bread for today, hunger for tomorrow, it does not modify the upward fundamental of the dollar at all, the effect is ephemeral (to calm the financial dollars) and at the same time generate mistrust,” he stressed.
Of the same vision, the economist Natalia Motyl said that “I find it difficult for them to be able to reassure them for a long time.” And he envisions that “it is likely that there will be an overreaction effect that will bring the dollars down to $470, but I do not think it will be sustained since what you have is a strong drop in demand for the peso, so any amount is insufficient today to calm the markets Today the markets discount that the current government does not arrive without a devaluation adjustment”
In addition, Anselmi He remarked that on previous occasions “it has already been seen that selling bonds does not calm the CCL, they have been doing it since it was at $400, to calm them you need dollars” In addition, he stressed that theThe BCRA has “zero” fire power with net reserves “in barely US$1,000 million.”
Instead, Bottler evaluated that in the current bullfight situation “The BCRA has to maintain this firm intervention behavior so that the fall in dollars is not momentary, that it is validated, and that it is seen that it was paid dearly (the price of free dollars)”.
“I believe in this context, the only measure is intervention, because this government, Masa included, does not have the credibility to create any positive expectation and that the situation calm down. The only thing that can reassure the market are effective measures, such as intervening firm,” he concluded.
