The Central Bank continues with the purchase of reserves: the three reasons for this push

He Central Bank (BCRA) chained its tenth consecutive day of purchases in the exchange market on Monday, after accumulating almost US$700 million last week. This result is mainly attributed to the decrease in the demand for foreign currency by the private sector.

According to two private reports, the liquidation of dollars from issuances of Negotiable Obligations (ON) by the energy sector, along with the effect of money laundering, They continue to be key factors that drive the organization to strengthen its balance sheet for the end of the year. In a third factor, according to PPI, the dynamics of the financial dollars who serve as a kind of incentive.

“This week the BCRA also could enjoy very good performancesince Pampa Energía’s ON of US$360 million placed abroad last week will be liquidated. Beyond this specific point, as we always say, it is as key that money laundering dollars continue to be channeled into loans as it is that the rate-dollar spread remains attractive to encourage exporters and importers to extend the carry trade“he explained in his monthly report.

But let’s stop at the money laundering that explains half of the foreign currency that the organization buys: What is this phenomenon due to?

Bleaching effect: how it impacts reserves

Without considering corporate debt issues, much of this positive streak phenomenon is explained by the settlement of credits in dollars. These operations correspond to bank financing facilitated by the unexpected and significant liquidity generated in the financial system after the implementation of the asset regularization program that began in mid-August. This is mentioned in a special report from Aurum Valores on Monday.

Between the end of October and the 10th of this month, The stock of credit in dollars to the private sector increased by US$1,235 million. “In that same period, the Central Bank acquired US$2,065 million in the exchange market, which shows that this channel, fed by dollars from money laundering, was one of the main sources of foreign currency for the monetary authority. In fact, The increase in credit in dollars explains 60% of the recent accumulation of BCRA reserves”, highlighted a special report by the consulting firm Aurum.

Nevertheless, The increase in dollar liquidity within the banking system has not yet shown signs of stability. Since the end of the laundering, when private deposits in dollars reached a peak of US$34,611 million, the stock has registered a daily decrease, accumulating a total drop of US$2,783 million. Although this decline is less than initially expected, the trend has not yet stopped. In any case, for PPI liquidity continues to remain at Milei era highs.

In any case, Aurum highlights that the ratio between credit and deposits in dollars went from 24% to 30%, approaching the previous historical average.

In the second quarter, this ratio had reached 37%. Therefore, if the stock of dollar deposits did not continue to decrease (a scenario that seems unlikely according to a recent presentation by the vice president of the BCRA, Vladimir Werning, who projected an improvement in dollar credit to the private sector), there would be room for The stock of credit in hard currency increases by more than US$2 billion, according to estimates by the consulting firm.