Thursday , August 18 2022

In the city the dance came back with the quote green …


The uncertainty in the exchange market returned to the domestic market. The dollar began this week with a rise of 1.44 pesos and closed at 39.94 pesos. The exchange rate again showed strong volatility. This movement led to a sharp drop in hard currencies of public securities. State risk rose again to close to 700 basis points. Investors began to dollarize their assets again and demand higher interest rates in local currency remain at peso. The withdrawal of reserves is the second factor that worries the market, as well as the lack of medium-term plan, which improves the receiver in foreign currency.

The monetary entity, which is responsible for Guido Sandleris, ran between October and mid-November, with a particularly extreme monetary base program, to moderate the pressures on foreign currency. The exchange rate, having reached a peak of more than 41 pesos in the last days of September, retreated to the floor of the band and changed close to 36 pesos. But as last week there were again tensions with the dollar and this week began with a buying wave that put the price back around 40 pesos.

Today, 134,844 million pesos were sold and the rates dropped slightly. An average yield of 61.24% was offered, compared to 61.41% last Friday. The maximum rate was 61.75%. This is a drop of almost 14 points compared to the 74 percent peaks recorded in mid-October. Investors again raised their expectations for depreciation and asked for higher interest rates so as not to dollar the assets. The situation is enhanced by the central bank loses reserves at rates of more than $ 100 million a day.

The reserves amounted to $ 51,591 million, a decrease of $ 145 million. The BCRA has lost $ 2451 million since October 30, when the strengthening of the IMF enters. This means that 44 percent of the extended IMF loan has lost in less than a month. This is a tendency that generates fear in the market and emphasizes the lack of sustainability of the macro strategy.

The uncertainty with the exchange rate begins to be a problem for the center. The wholesale exchange rate ended at 39.05 pesos, increasing 1.45 pesos, with an operating volume of $ 724 million. The price of the currency currently continues with a margin below the exchange-rate ceiling (46 pesos), but the volatility of the currency already affects expectations. This complicates the intention to slow inflation in the last part of the year. The risk of a new currency exchange continues to be hidden and distorted the vision of finances for the coming months. The electoral factor next year is another stressor. Domestic investors tend to increase the level of foreign exchange storage in elections.

City operators offer a simple but reasonable explanation to explain the return of exchange instability. Interest rates in Psios are at very high levels. In October, he earned 5 points in Pesos for investments in Pazos. At the same time, the exchange rate appreciated by almost 15 points. This means that the economy offered to those who gamble on the yield hard currency yield of nearly 20 percent. Returns it very difficult to sustain for a long time. The dollar will rise sooner or later, or the interest rate in Peso will fall further. The second did not happen.

The key element to understand the exchange uncertainty has been an introduction with Lebac. High profits offered by these securities, as they have offered since October, the established terms and other assets in the pesos, are made only if the investor manages to replace the local currency for a dollar at an affordable price. The latter who sells the assets in the pesos to switch to foreign currency loses that it does with a high dollar price. This creates a spiral effect that enhances the instability of the contribution in which the dollarization is fed back.

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