In the first two rounds of the week, the monetary authority maintained a depreciation rate of 5.8% and 7.14% TEM respectively. So far in May, the crawling peg accumulates a monthly rate of 7.3%.
The Government announced a package of measures last Sunday in order to stop the strong inflationary acceleration, after knowing the 8.4% in April. Between them, The economic team stated that the Central Bank will manage the rate of adjustment of the official exchange rate, but without giving further details.. This raised doubts in the market about what speed of depreciation will print. On the one hand, there are those who expect an acceleration with the aim of reversing the accumulated exchange rate arrears with respect to the level agreed with the IMF. On the other hand, some argue that the BCRA will use the crawling peg as an inflationary anchor.
In the first two rounds of the week, the monetary authority maintained a depreciation rate of 5.8% and 7.14% TEM respectively. Andres Reschinianalyst in F2 Financial Solutionshighlighted: “The daily movement on Friday was 4.5%, so we had a slowdown on Friday and Monday and on Tuesday’s wheel it resumed the pace it had before Friday. It is very difficult for them to slow down the crawling peg forward with this proportion of remunerated liabilities, because they are going to further damage the net worth of the Central”.
Thus, So far in May, the crawling peg accumulates a monthly rhythm of 7.3%, evidencing an acceleration compared to 6.5% in April, although it is still one point below inflation. So far this year, the crawling peg has been accelerating month by month, going from 5.5% in January and February and to 6% in March. However, in all months of the year it ran behind the CPI.
However, Despite the fact that the crawling peg lagged again with respect to prices, the multilateral real exchange rate, an index that compares the Argentine peso with the currencies of the country’s main trading partners, recovered ground in the first months of the year and stable in recent weeks. The TCRM started the year at 93.8 points and, at the beginning of April, reached its highest since last June at 97.6 points. Currently, the index is at 95.3 points and remains close to the highs of the year. However, the indicator is still behind what was agreed with the IMF, to sustain it at the levels of December 2021, when it was 102.5 points.
On this point, Reschini pointed out: “The best dynamics of the TCRM is mainly related to what happens outside. The real has been appreciating, the other trading partners are leaving inflation problems behind, and we weren’t lagging so much anymore. But if we deepen the lag and get more expensive in foreign currency vs. the rest, the TCRM is going to appreciate”.
Thus, the fact that the dollar has moved away from its global highs has had a positive impact on emerging currencies, including the peso. The TCRM began to reverse its decline in late 2022, as signs began to appear that US inflation was beginning to slow and that the end of the Fed’s contractionary monetary path was near. In this framework, the dollar index fell from its highs in the year, of 114 points. So far in 2023, it fell 4%, from 105 to 100.8 points. Within this framework, the Brazilian real appreciated 7% and the euro, 6.3%.
On the course of the crawling peg, from ecolatin They argued that “the complexity imposed by the lack of dollars and the need to avoid a greater exchange rate appreciation leave little room for maneuver for the Government to apply this year the traditional electoral recipe of delaying the exchange rate.” Although they considered: “We do not expect to seek to undo the delay, but to manage it, which will continue to generate an excess demand for foreign currency that, together with the shock in the supply of foreign currency generated by the drought, will continue forcing the Government to seek ways to compensate it. ”.