The stability they showed the MEP dollar -also known as the Bolsa dollar-the Counted with Liquidation and the blue since the end of January – when the principle of agreement with the FMI– evaporated this last week and all three parallel currencies broke the $200 barrier. The blue dollar closed on Friday, April 22, at $203, with which it climbed $8 during the week, the highest rise since January, and the gap with the official wholesaler widened to 77.7%. While, the CCL and the MEP that are traded on the stock market registered weekly increases of 9.6 and 8.9%, respectively, at the end of above $208. In these cases, the gap with the official wholesaler it exceeded 80% once more.
The rebound of the free dollars occurs following it was known that the inflation March was 6.7% and following the announcement of the Minister of Economy Martin Guzman of the granting of bonds to reinforce the income of the most vulnerable sectors, and promote a tax on unexpected income for companies with net profits greater than $1,000 million.
The announcement of the new ‘platita plan’ generated noise in the market that doubts the fulfillment of goals with the IMF
Dollar rise: what were the causes?
Among the reasons for the rise in prices of parallel dollars, some analysts allege that the new “silver plan” may imply greater emission and generates doubts on meeting the fiscal deficit goal with the IMF because it implies a cost of $200,000 million (0.3% of GDP), which causes “noise” in the market.
They also affirm that in the face of the inflationary acceleration in March and private estimates that the cost of living in April will exceed 5%, “it was expected” that at some point the dollars would wake up and begin to have movements more in line with inflation. .
In addition, everyone agrees in linking the rise in alternative dollars to the difficulty that the Central Bank is having in accumulating reserves in April, despite the fact that the high supply season has already entered due to the liquidation of the thick harvest.
Faced with this combo, the market says that funds from abroad that had taken advantage of the calm exchange rate, the rise in rates in pesos, and the attractive profitability of CER titles who adjust for inflation to make “carry trade“, disarmed positions in recent days. This also encouraged the rise in financial dollars.
Difficulty accumulating reserves
The agreement with the IMF contemplates a goal of accumulating net reserves for this year of $5.8 billion. The objective of the first quarter was achieved in a adjusted manner and thanks to the first disbursement of the program with the IMF at the end of March. In that sense The small amount of dollars that the BCRA is buying in April is worrying.
Sebastian Menescaldidirector of Eco Go, attributed the rally in financial dollars to “The Government is finding it very difficult to meet the reserve goal, it has to buy US$2.9 billion in the second quarter and it is achieving very little” despite the liquidation of agriculture.
This Friday, April 22, the monetary entity acquired US$15 million in the official foreign exchange market (MULC), which ended the week with a positive balance of US$152.9 million, and in the month it accumulates net purchases for US$165.3 million, according to official sources.
The BCRA fails to buy many dollars in April to swell reserves despite the income from the settlement of the harvest
Menescaldi compared that this figure is far below in relation to “the $1,667 million” that had been accumulated at this time of the month in 2021.
At the same time, Emiliano Anselmi, leader of the PPI macroeconomic team, specified that so far this year The BCRA accumulates a purchasing balance of “US$147 million versus US$3,597 million in the same number of wheels” in 2021.
In this frame, Alejandro Giacoiaan economist at EconViews stated that “doubts regarding meeting the goals with the IMF generate noise in the market, the reserve guideline for the first quarter was met thanks to the contribution of SDRs from the Fund and the fiscal deficit thanks to an accounting trick “, and warned that “for the coming quarters the situation is more complicated and the market perceives it,” emphasized the economist.
In tune, a report from the consultancy FMyA pointed out that “agribusiness is liquidating, the dollar is no longer falling behind (the crawling peg is accelerating), but demand remains firm, so the BCRA does not buy reserves“. And he predicted: “In May-June, agriculture is going to continue liquidating, but the BCRA still needs to buy US$2.6 billion, at this rate it is not enough.”
Do the dollars rise due to the disarmament of the carry trade?
Given the scenario of uncertainty, a disarming of the carry trade has been evident in recent days. For Ferdinand Baerchief economist at Quantum Finance, “recent rises in financial dollars have to do with greater demand for funds from abroad who are still trapped, did carry these months and took advantage of the low level to disarm and dollarize”.
“There are funds from abroad disarming bond positions in pesos. That might be the catalyst. While the CCL is quiet, nobody goes out to buy because the opportunity cost is high, but it is enough that it starts to move for some reason so that everyone goes out to hedged and the movement is exacerbated”, commented a broker of the market to iProfesional.
Investors put aside the carry trade and sought coverage in the dollar.
Lucas Yatchehead of strategy at Liebre Capital also said “there was profit-taking by those who had been carrying during the last four months, who had been accumulating a very significant return, The market for financial dollars is small and with some important players participating with significant volume it can generate this type of movement”.
In turn, a report PPI pointed out that “on Monday, April 18, the coupons of the BOATS 23 and 26 (Treasury Bonds) and the maturity of a LEISURE (X18A2), looking at the detail of the holding via Bloomberg, we detected that a large real money fund had part of these instruments.” And they added: “If we add to this that, in the first auction in April, in the absence of options short CER, the roll over was well below the previous months, we can suggest that part of those pesos were pressing the CCL during the week“.
At PPI they analyzed that “in such a small market, and Given the terrible fiscal signs and the very poor accumulation of reserves these days, this one-off event might extend further”. In FMyA They also mentioned that “a large background (Templeton) CCL sued.”
In this way, Javier Casabal, an analyst at Adcap Grupo Financiero, said that at the beginning of March they had recommended carrying out a carry trade because “we expected there to be a strong accumulation of reserves, as happened last year, but that is clearly not happening.” For this reason, Casabal commented that “We think it’s a good time to take profits following a significant outperformance in peso inflation-linked bonds.”
The BCRA might tighten the access of dollars to importers in order to accumulate reserves, according to some analysts
Is a tightening of the trap coming?
To the scarcity of purchase of reserves, it is added that the imports in March grew 33% year-on-year, reaching US$7,074 million “the highest value observed since August 2013” indicated the consulting firm LCG, and highlighted that in the first quarter they increased 40% year-on-year “14 percentage points above the growth of exports”.
Yache explained that “One of the reasons why the BCRA is having a hard time accumulating reserves is that the interest rate is running below the pace of devaluation of the official dollar and that discourages exporters from liquidating and encourages importers to advance payments”. And he limited: “In addition, the BCRA released a certain demand by importers.”
Against this background, in FMyA They evaluated that the solution might be to “tighten the trap once more, unless Argentina receives US$1.4 billion from the IMF in global aid that the international organization is evaluating.” For the consultant “The higher spending due to the new silver plan and the possibility that the BCRA will have to tighten the stocks to buy reserves might be behind this week’s rise in the CCL.”
of the same look, Menescaldi stressed that “all the dollars are being taken by the real economy because other payments were not important, imports are flying”. And he estimated that “they will have to recalibrate the dollars that they deliver to importers, the stocks will be tightened in some way to be able to accumulate reserves, and most likely it will be in this quarter,” he estimated.
For Jorge Vinasportfolio manager of Toronto Trust, “in these months they took advantage of the extraordinary inflow of the IMF to relax imports and thus fuel economic activity, but to the extent that they cannot accumulate reserves, it is probable that they will restrict once more”.
Instead, Anselmi He said that “I don’t see a tightening of the stocks soon, the net reserves following the disbursement from the IMF are at US$3.8 billion, although they are not buying much now, but June is the month with the most seasonality, with which they can reach to buy yet”.
The market believes that if the BCRA fails to accumulate more reserves, financial dollars will continue to rise
Will financial dollars continue to rise?
For vineyards“To the extent that a purchase of reserves according to seasonality does not take place, the upward pressure on financial exchange rates may intensify”.
Baer agreed that “the pressures are going to be produced to the extent that the problems continue: difficulty in accumulating reserves and progress of the program with the IMF.”
Casabal considered that “in these circumstances, we cannot be too surprised if the gap returns to levels of 85% or 90%”.
For Giacoia, “salary increases began to be negotiated and to the extent that income is recomposed, there may be more demand for foreign currency to hedge once morest the acceleration of inflation. That may also have had an influence on prices.”
The analysts of Invest in the Stock Market They stated: “You are seeing a market sensitive to recent political news, which is driving the current CCL rebound. As agribusiness sells off its crop and the opportunity cost of not carrying trades goes down, we believe that the CCL will continue to gain strength as it was seen last year.
