In this way, the prices came to pierce $190 and the gaps to be below 70%. However, those numbers appeared to be bottomed out and the trend reversed sharply in recent days.
“In theory, periods of strong carry gains are followed by periods of significant corrections. The risk of the carry is that the dollar rises”, affirmed in dialogue with Ámbito the Ecolatina analyst, John Paul Albornoz.
The economist argued that the appetite for Argentine assets was motivated precisely by short-term operations and not by expectations of growth in local assets, for which he related the “carry” with “the game of chairs.” “As long as you continue to have your chair, you can create fictitious dollars by earning a fee in pesos. As long as you take profit before the currency jump, it works. The correction in free dollars that we saw recently is just that: profit taking,” he said.
Julius Calcagnino, a market analyst at TSA Bursátil, told this outlet that prices close to $190 implicitly reflected a real exchange rate close to the 2002 average and that the market seems to be looking for levels similar to those of the exit from convertibility. “A priori, it seems like an excessive exchange rate that usually reflects panic or high uncertainty,” she said.
Parallel dollar bounces appear to be supported by several issues. First of all, the most obvious fact is that the inflationary acceleration generates a lag of the rest of the variables in nominal terms.
In the second instance, some Doubts regarding the Government’s ability to meet the fiscal deficit target agreed with the IMF. This week the Executive Branch launched bonuses for informal workers, private households, monotributistas and retirees, to alleviate the effects of rising prices on the income of these vulnerable sectors.
Its financing is uncertain. The Minister of the Economy, Martín Guzmán, intends to obtain the funds through indebtedness in local currency with the market and through a tax on the “unexpected income” that some sectors had as a consequence of the war. However, financing with monetary issuance is also a latent possibility, which adds fuel to the fire on the foreign exchange front.
At the same time, it was recently known that the primary fiscal deficit for the first quarter reached some $192,735 million, a figure lower than the $222,264 million that had been established in the extended facilities agreement with the multilateral credit organization.
However, some analysts warned that the overachievement of the objective would not have occurred without the $122,000 million that the National Treasury registered as current income in concept of an accounting “gimmick” that reflects the entire difference between what is raised by debt issues in pesos and the face value of the debt issued.
Third, the BCRA was expected to take advantage of the opportunity to accumulate reserves during April, due to the soybean and corn harvest season. At the moment, the monetary authority collected a meager US$174 million in net terms.
“From Adcap we had recommended entering the carry trade at the beginning of March, but already at the beginning of April and following a reduction of the gap from 87% to 70%, a growing fragility began to be seen, due to the latent threat of increases in the field retentions. This week, this fragility continued to grow due to concerns generated by the BCRA’s inability to accumulate reserves, even when there are record liquidations of agriculture“, he pointed Javier Casabalfixed income strategist at Adcap Grupo Financiero:
“For this reason, this week we recommend closing the trade. Although the gap reduction might have continued due to the time of year, as it did in 2021, due to this enormous fragility we should not be surprised if the exchange rate gap returns to levels of 90%” , estimated the specialist.
Albornoz also expressed concern regarding “the dismal performance of the BCRA in the MULC in a month of seasonally very high settlements.” “This, added to the energy issue, sets off alarms. Hopefully the BCRA can accumulate reserves in the next two months, otherwise the IMF’s goal will be very difficult to meet and with it devaluation expectations will grow”, he projected.
For its part, from TSA Bursátil they clarified that, although they see the CER curve as attractive, mainly in the middle section, they do not recommend the sale of hard currency to take positions, but rather the application of flows in it.