Despite the acceleration of inflation and the deepening of the bleeding of dollars due to the sales of the Central Bank in the official exchange market to supply demand, the rate of adjustment of the exchange rate in March was once again below inflation.
The official exchange rate was devalued in March 6% per month (end to end), which accelerated the pace compared to February and January, when the adjustment had been 5.4 and 5.5%, respectively.
However, this speed was far behind inflation in March, which would have fluctuated between 7 and 7.4%.according to estimates by private consultants.
In this context, the IMF staff report released on Monday on the fourth review of the agreement with Argentina emphasized that the exchange rate is lagging “from 10 to 25%” and raises the need to speed up the crawling peg. (daily mini-devaluations of the official exchange rate) so that it is positive in real terms and not lose competitiveness.
In the market they allege that the fictitious price of the official dollar makes the supply of foreign currency insufficient to satisfy the demand and makes it difficult to accumulate reserves. In addition, they point out that The new scheme for the agricultural dollar and the exchange measures that will be announced this Wednesday aim to avoid an abrupt jump in the exchange rate, although they also assure that they imply a hidden devaluation,
Official dollar: how did April start?
Andres Reschinian analyst at F2 Soluciones Financieras, indicated that at the end of March “the official dollar accumulated a delay of 42.5% in the management of Alberto Fernández”, and stressed that “it deepened again month by month with the beginning of this electoral year”. .
Despite the greater drain on reserves, the official dollar in March closed below the rate of inflation
The analyst noted that the rate of devaluation accelerated at the beginning of April. In this regard, he explained that “in the first two rounds of this month, the official dollar has an average rate of 6.68% MET (Monthly Effective Fee)“.
“If it continues until the last wheel of the month at this rate, it would accumulate an adjustment of 6.23%,” calculated Reschini, who estimated that “surely, in April we will see it advance faster in terms of TEM because this month it has its last wheel on the 28th”.
At the same time, Emiliano Anselmileader of the PPI macroeconomic team, commented that “it seems that there is a new rhythm: 121.85% average TEA in the first two days of April, consistent with a monthly effective rate of 6.9%.”
The expert said that the authorities “It would seem that they validate a new level in line with the step jump in inflation, but still a little behind”. And he believes that this month the exchange rate “will try to bring it close” to the inflationary rhythm.
Can the rise of the dollar be accelerated more?
Sebastian Menescaldi, director of Eco Go, commented that “in recent days, the rate of the official dollar has accelerated a lot. I think they’re going to keep it close to inflation because they’re not going to lose competitiveness on that side, it can’t go much lower because they don’t have reserves.”
of the same gaze, Fernando Baer He stated that “the rate of devaluation will have to accelerate in April because inflation is higher than expected, and it is a commitment that arises from the review of the agreement and the IMF staff report.” According to his vision, the BCRA should carry the crawling peg “at least, at the rate of inflation.”
The IMF staff report emphasized that the official exchange rate has a delay ranging from 10% to 25%
Also, the consultant Ecolatina asserted that “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 electoral recipe of delaying the exchange rate”.
However, the consultant considered that “We do not anticipate seeking to undo the delay, but to manage it, which will continue to be functional to an excess demand for foreign currency in the exchange market”.
In turn, the financial analyst Gustavo Ber assured that “beyond the fact that the IMF would be requesting that the dollar run above inflation, to avoid accumulating further arrears, I think the strategy would continue to be for the crawling-peg to move below inflation.”
“More in a stage of acceleration of inflation, since accelerating the slide would add pressure to prices, and given that the short term would be privileged in an electoral year, it would not make sense for the Government to assume the political costs so as not to benefit from the eventual future benefits,” he said.
Ber emphasized that “the margin to continue with this strategy is sought through measures on the supply and demand of currencies, -such as the soybean dollar 3- whose new round is expected to be announced this Wednesday, which aim to cushion the draining of reserves and thus being able to move more calmly through this transition stage”.
How much will the devaluation be in April?
the economist Natalia Butterfly He judged: “The BCRA should increase the crawling peg rate, and I think that by only 0.5 percentage points it will remain below inflation but it will not lag so far behind.”
At the beginning of April, the BCRA accelerated the rate of daily mini-devaluation, which in financial jargon is called crawling peg
“Very abrupt jumps or strong acceleration of the crawling peg rate to position it above inflation are not recommended, since they could trigger a crisis of confidence that further pressures the demand for coverage,” he said.
The analyst remarked that “we are entering a second quarter where the lack of availability of foreign currency to import makes it difficult economic activity sectors, a higher dollar impacts costs and demand, it would further suffocate the economy”. In this context, he opined that “They won’t make a strong adjustment to the crawling peg rate and take it to 6.5%.”
And it is that he argued that if “a differential exchange rate is implemented, that will bring more relief in the markets because it means a greater entry of dollars, even if it is only for a month, but it would give the government air to keep the official dollar below of inflation”.
With the same reading Reschini opined that “I do not see this administration as very committed to complying with the IMF guideline of not delaying the official dollar and probably in April we will again see it have a lower variation than the cost of living and the monetary policy rate, unless we have some disruptive event.”
“Differential exchange rate measures can help buy time to keep the dollar behind, even if a greater imbalance accumulates,” judged the expert. In this context, he considered that “if there is no rate hike, I don’t think April will accumulate more than 6.5%.”
For his part, the economist Federico Glustein it anticipates that “the exchange rate will be delayed to avoid more gasoline for inflation, which in March will be 7% and has a high floor for April with all the upcoming increases.”
With the arrival of the soybean dollar 3, analysts affirm that the Government seeks to avoid an abrupt jump in the official exchange rate
In his opinion, “the BCRA is going to step on the official exchange rate” because “in electoral times the exchange rate anchor is necessary to prevent it from passing to prices.”
“The reality is that the Government is between a rock and a hard place on the external front where it requires dollars for necessary imports to avoid setbacks and slowdowns in the economy, and for obligations. But it does not have them, so will further strengthen the stocks by unifying exchange rates and quotes”he pointed.
Thus, he estimates that the devaluation rate in April will oscillate “between 5% and 6%, taking into account that inflation is projected this month between 6% and 7%.”
