The indicator fell from 116.5 points reached with the exchange rate jump to the current 95.8 points. Analysts point out that there is a delay of 43% with respect to inflation during Alberto Fernández’s administration.
He Multilateral real exchange rate (TCRM)an index that compares the peso with the currencies of the country’s main trading partners, deepened its fall in recent weeks and returned to the level prior to the devaluation. After the discrete jump of the official exchange rate, the indicator had reached its highest levels since June 2021. However, the inflationary acceleration and the fixing of the exchange rate at $350 caused the devaluation effect to be consumed in just a month and a half. Analysts warn that the official exchange rate accumulates a delay of 43% with respect to inflation in the current administration, and that the futures markets discount a new devaluation at the end of the year after the change of Government.
After the devaluation of the official exchange rate, the TCRM jumped from 95.8 points to 116.5 pointss, highest level since June 2021. Thus, the index recovered ground after having fallen progressively throughout 2022 due to the strong local inflationary acceleration and the strategy of the crawling peg which ran behind the CPI throughout the year.
However, the strong pass through of the 22% jump in the exchange rate in mid-August progressively erased the recovered competitiveness and fell back to previous levels. The devaluation caused a strong transfer to prices, which took the August CPI to 12.4% (highest level in 32 years), while private estimates for September indicate that it will be the second consecutive month with an inflation of two digits. In this framework, as the exchange rate remained fixed at $350 since August 14, the recovered competitiveness was eroded.
Andrés Reschini, analyst at F2 Financial Solutions, pointed out that “at the end of August, as a result of the devaluation of the official exchange rate, its delay with respect to inflation fell to 27.6% during Alberto Fernández’s administration. At the end of September it rose to 43%, recovering the levels prior to the devaluation jump. The speed of the pass through made us value in real terms the same as before the jump.”
Added to this dynamic of strong inflationary acceleration that quickly impacted the competitiveness of the peso was the strengthening of the dollar globally after the Fed once again marked its hawkish stance regarding forward interest rates at the last meeting in September. In this framework, the dollar index, which compares the North American currency with a basket of currencies, rose from 103 points, on the day of the devaluation, to the current 106.72 points, reaching its highest levels since the end of last November.
With all TCRM It also fell below the level that had been agreed with the International Monetary Fund in January 2022, of 102.5 points, that is, the level that existed in December 2021. This level was lost in April 2022 and was not recovered again until the devaluation. Going forward, it is uncertain what will happen to the official exchange rate. On the one hand, the Government committed to maintaining it at these levels throughout October, while, on the other hand, the futures markets discount a new devaluation towards the end of the year.
On this point, Reschini He pointed out that “going forward, if we look towards the change of mandate, the outlook in terms of local factors is not so clear. Inflation will remain high but what may happen with the official exchange rate is not so clear and one thing is that they manage to maintain it and another that they validate another jump/s as is implicit in the futures curve. After the transition we will have to see what the winning candidate finally ends up putting into practice, and we also don’t know who it will be. I think it is likely that they will begin to normalize, but we have to see the way.”
Source: Ambito
