From Fed cuts to fear of PIT-CNT plebiscite, the keys behind the dollar’s jump

Last Wednesday the dollar climbed 1.46%, in one of its largest daily appreciations throughout the government of Luis Lacalle Pouand entered fully into the 41 pesos range, its highest value in almost two years.

To find the US currency at these levels in Uruguay We have to go back to the second half of 2022, before a downward trend began that confirmed a sustained depreciation until the last months of 2023. On the screens of the Electronic Stock Exchange of Uruguay (Bevsa), the price reached a maximum price of 41,100 pesos during the day, closing at 41,030 pesos.

On this atypical and intense day of exchange he spoke Scope with specialists, after the president of the government in recent days Central Bank of Uruguay (BCU), Washington Ribeirohe said before the Budget Commission integrated with the Treasury of the Senate that “there is no exchange rate to close the balance in all companies in Uruguay“and that the country’s “political stability” has contributed to its solidity in recent years.

The supervisor of the Economic Analysis and Forecasting Service of CPA Ferrere, Giuliano Cantisaniexplained to this medium that in recent days “movements” and “recompositions” were noted in the investment portfolios of some agents, possibly motivated by “the concern that the bill will be approved plebiscite on social security” that drives the PIT-CNT.

In this sense, although the firm does not see a “high probability of approval” of the union’s initiative, it could expect “certain volatility in the short term”, although it would be unlikely that this trend will consolidate over time.

The impact of the US inflation data on a global level

For his part, Balanz’s financial advisor, Alan Babicrecalled that the inflation data for August presented by the United States Department of Labor (USDOLfor its acronym in English) was lower than expected by economic agents and that this “confirms that the Fed will lower rates” less than was speculated.

“Although it is not yet confirmed, the market is already discounting a 0.25% drop,” said Babic, who maintains that this is below the forecasts of a 0.50% cut in interest rates, leading to an appreciation of the dollar at a global level. In the last few hours, the greenback gained ground against the Argentine peso in the informal market, but also against the euro, the Swiss franc, the pound sterling, and the yen, among other foreign currencies.

With a month and a half to go before the general elections, the future behaviour of the greenback at the local level is tinged with doubts, with a radical turn in terms of social security unlikely (but not impossible), and with agriculture and industry raising demands for “exchange rate lag“, without the economic proposals of the political parties clarifying the horizon.