After eight consecutive days on the rise, the blue dollar took a breather and fell to $474. Thus marking a retracement of $21 from $495 on Tuesday. But at the cost of sacrificing dollars from the reserves, since, in order to stop the currency run, the Government opted for a strong intervention on the financial exchange rates that ended up having an impact on the informal bill.
That strategy led the parallel currency to pull back to $465 at one point, finally closing at $474.
On Tuesday, when the blue was close to $500, the Minister of Economy, Sergio Massa, broke the silence to warn that the Casa Rosada would use “all the tools of the State to order this situation” and, shortly after writing that message on Twitter, strong official interventions began to be registered in the bond market. That allowed financial exchange rates to roll back for the first time on seven wheels.
As in a game of mirrors, that trend was reflected yesterday in blue. Because although official interventions do not have a direct impact on the informal market, the parallel exchange rate is usually aligned with financial prices, which are those that arise from the purchase and sale of sovereign bonds.
The Central sacrificed reserves
Specifically, Massa relied on three pillars: he authorized the Central Bank to sell dollars from its reserves to go out and buy bonds and stop the skyrocketing financial exchange rates; He assured that “fresh dollars would arrive” while he renegotiated the agreement with the International Monetary Fund (IMF) and informed that he was going to use the Foreign Exchange Criminal Justice to stop any destabilizing attempt by the market.
At least yesterday, this package of measures had its effect so that the blue dollar moved away from the psychological barrier of $500. While the market doubts if it is an ephemeral retraction or it can be sustained over time. And if so, until when.
“As in any currency run, the dollars rose a lot and quickly. That meant that yesterday (by Tuesday) the informal tables did not buy more bills, because they wanted to wait for a counterpart, to know that later they would be able to sell those dollars. That is to say, not even the caves considered that the blue at $500 could be sustained and they did not want to pay too much. Let’s remember that a week ago it was trading at $400, it was a significant jump, 25% in a few days. Likewise, an intervention by the Government was necessary, with the Central Bank (BCRA) and the Treasury, to calm the financial dollars and show some ‘control’ of what was happening”, described the financial analyst Christian Buteler in this regard.
For this economist, several reasons explain the frenetic run in recent days. For example, the fiscal result for the first quarter of the year, which was worse than expected and led to failure to meet the goal with the International Monetary Fund (IMF). On the other hand, the announced agricultural dollar did not attract the foreign exchange expected by the Government, to the point that the Central Bank had to go out and sell reserves (yesterday it sacrificed another US$49 million). The inflationary acceleration, plus the exchange rate and negative interest rates in pesos are other reasons that affect the appetite for the dollar.
Determined to cut the bullish streak of the blue, the Government, as was said, returned to put its hand yesterday in the financial prices. Thus, the MEP dollar was agreed at $446.43, a drop of $1.07 compared to the previous close (-0.2%). But the cash with settlement (CCL) traded at $469.29, a daily gain of $3.27 (+0.7%).
“The novelty is that the Government has decided to intervene in financial dollars using currencies that add to the ‘fire power’ of dollarized bonds. Interventions are likely to continue to keep financial dynamics in check. However, maintaining this effort for several more days can have a significant cost for reserves, a variable about which there is precisely a deep fear given its low level,” warned Delphos Investment.
“The Central Bank and the Treasury understood that the only way to really intervene on the financiers is with dollars from the reserves. It’s what they did yesterday and today to keep prices tight, making sure to put an end to this mini-run on the currency. The signal, facing the market, is that if they have to intervene directly with dollars, they will do so. Now, what will have to be seen is how long this strategy can last, because it will depend on how much soybean III is settled with the dollar. The limit is clear: the lack of dollars; and there the market takes the pulse, it knows that there is none”, added the economist Fernando Camusso.
In this sense, the shortage of foreign currency and exchange uncertainty led Massa to announce that as part of the exchange of currencies with China, the possibility of paying imports directly with yuan was activated, so as not to affect the Central’s stock of dollars. “In April, more than US$ 1,040 million of merchandise imports of Chinese origin are replaced and will be paid in yuan,” said the Minister of Economy.
Despite the announcement, which was intended to send a solid signal in the midst of the crisis, the monetary entity ended up with a negative balance due to its interventions in the exchange market. Yesterday it had to invest US$ 84 million in the wholesale segment to satisfy the import demand. A red that was partly moderated by the US$35.4 million that entered the “agro dollar”, but that could not prevent the Central from ending up with a drain of US$ 49 million.
Devaluation accelerates
On the other hand, and as a way of containing the skyrocketing of the exchange rate gap, the Government began to change the strategy with respect to the official wholesale exchange rate by accelerating the rate of daily devaluations. Yesterday, it traded at $221.57, which represented an advance of $0.70 compared to the previous session (+0.3%).
For analysts, this anticipates a further increase in inflation, while they expect the Central Bank to validate a new rate hike today.
The bonds, with ups and downs
With official interventions involved, Argentine bonds abroad presented increases of 1.69% (Global 2046) and falls of up to 1.03% (Global 2035). Bonares climbed up to 2.91% (AL35D) and fell 0.93% (AL29D).
The country risk remained relatively stable at 2,640 basis points (-0.3%).
At the local level, the S&P Merval traded at 304,796, marking a daily rise of 0.6%. In the panel of the Buenos Aires Stock Exchange, the greatest advances were observed in the shares of Transportadora de Gas del Sur (+2%), Transportadora de Gas del Norte (+1.8%) and Telecom Argentina (+1.7%) .
At the cost of sacrificing dollars from the reserves, the Government opted for a strong intervention
