To contain expectations of devaluation, the Central Bank deployed strong interventions in futures markets. This set off some alarms in private projections, which estimate that the position sold by the monetary authority exceeds US$7 billion. The amount begins to worry since the agreement with the IMF establishes a limit for official intervention in these markets of US$9,000 million by 2022: US$5,000 million in the Rofex and US$4,000 million in the MAE.
It is worth remembering that the BCRA is the main seller in the futures market, and acts in it to calm expectations of devaluation in the face of a strong demand for coverage by investors or companies that want to cover themselves. The operation of the dollar futures market is based on contracts that are agreed and charged in pesos, taking the official dollar as a reference. In the contract, the seller and buyer fix the value of the dollar at a certain future date. When the date arrives, depending on whether the official price of the currency is above the agreed price, the buyer wins, while if it is below the agreed price, the seller wins.
Along these lines, a report by Global Investments details that the implicit future dollar rates resumed a strong upward path during the last week and are currently at 100% annual values, which exposes the strong demand for market coverage. Likewise, they estimate that the Central Bank’s sold position is US$7.3 billion, an amount that is worrying due to its closeness to the limit set by the IMF.
Mauro Cognetta, managing partner at Global Investments, explained that there are many future dollar buyers and few sellers, basically the Central Bank. “There is a strong demand for assets with exchange rate coverage, both dollar futures and dollar links by Mutual Funds. The inflow to these instruments is even greater than to the CER segment, when months ago we talked about the escalation of CER funds. So this flood of pesos that goes to the future dollar pushes the implicit rates up and makes the Central have to give compensation, so that they do not rise even more, which explains such amount of position sold, “he said.
For his part, Andrés Reschini, an analyst at F2 Soluciones Financieras, stated that “today the open interest between Rofex and MAE is at US$9.678 million, and I estimate that the Central must have already sold between US$7.5 billion and $s8,000 million”.
In this sense, given the increase in the demand for the future dollar, he considered that “there are several indicators that lead one to think that the BCRA no longer has many options to continue with this scheme.” And he detailed: “The multilateral real exchange rate appreciates; the volume in the MULC shrinks as a result of the low incentive to liquidate and for capital to enter, largely due to the enormous exchange rate gap; the goal of reserves with the IMF is very compromised; and the balance of the BCRA is very deteriorated. All this in a global context that threatens with lower growth and higher rates”.
Source: Ambito
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