alert for reserves and the threat for the remainder of the year

Julius Calcagnino, market analyst of TSA Securities, pointed out that “The objective is located at US$2.9 billion for the second quarter and in April only US$161 million were reached. The good side is that, taking last year as a reference, the BCRA achieved net purchases in the MULC for almost US$2.8 billion in May and June, added that they are usually the best months in terms of foreign exchange settlement in the agro-export complex. . If the Central Bank manages to replicate the dynamics that it had in the MULC in May and June 2021, the objective seems possible, even more so considering the apparent overcompliance of the first quarter of this year.”

However, calcagnino pointed out that the challenge facing the BCRA this quarter is to over-fulfill the reserve objective, mainly when compared to the dynamics that the monetary institution had in the same period in 2021. “From the ‘Memorandum of Economic and Financial Policies’ A floor for variation in net international reserves is established for the third quarter of US$400 million and for the fourth quarter of US$1,400 million. However, last year the BCRA made net sales in the MULC for US$1,407 million in the second half, so it would be more than necessary to over-comply at this time. We take that some market sources consider an overfulfillment of US$2.8 billion in the first quarter of 2022, if the aforementioned dynamics of May and June of last year are repeated, US$2.8 billion more would be bought and sold then $1.4 billion in the second part of the year. We will probably see more financing from international organizations or restrictions on imports, with an unfavorable impact on growth. Likewise, the deficits related to tourism returned to the scene, together with higher international energy prices, so the scenario is not easy for the second semester.”

The Economist Frederick Glustein, For his part, he warned that the scenario becomes complex. “The context is one of record imports in the decade, an increase in energy imports that contrasts with the high prices of commodities, so the monetary authority cannot absorb more foreign currency. Likewise, the notorious exchange rate appreciation encourages the demand for dollars, delaying the agreed objective. At the moment, US$615 million have been accumulated for this time of the month. If it continues at this rate, I estimate that the monthly absorption would reach US$800 million since May is very surplus in terms of foreign trade, despite the increase in imports. We will have to hope that international prices do not drop because a large part of the accumulation was due to the price effect rather than the quantity effect. The dilemma will be June due to tourism and the drop in activity in the second quarter, together with the energy demand due to the cold”.

For Sebastian Menescaldi, director in Echo Go Consultant, “The greatest accumulation in the first days of May occurred along with an increase in the settlement of the field, compared to last year’s values. Today you would still need US$2,377 million to meet the goal next June, which implies buying approximately US$63 million per day. It’s doable, but probably requires some trade management considering imports were back above $7bn on the MULC last month.”

For its part, Andres Reschini, from F2 Financial Solutions, pointed out that “85% of the currencies acquired in the MULC, so far this year, were bought in 7 rounds of May. If they continued as they came until the end of April, the goal could not be met.” Also, he warns that it will be difficult to sustain the rhythm of purchases that the agency had in the first days of the month, because “the volume of operations in the spot is low, we are at 45% of the average negotiated per wheel in May of last year and with prices in dollars Taller. If the BCRA leaves the demand unsatisfied, we will have problems in the activity and greater pressure in the price level”.

Source: Ambito