In the midst of strong dollarization, the Central Bank confirmed that the swap will give “maneuver capacity” to intervene in the CCL dollar and the MEP.
The Minister of Economy, Sergio Massastated today that the expansion of the swap with China for US$6.5 billion“it is enormous news for the strengthening of Argentine reserves”, and will allow “ give a lot of maneuverability” in financial markets and “accelerate import payments”
“From today, work by Customs, the Ministry of Commerce and the Central Bank begins to accelerate the payment of imports and production processes,” said Massa in dialogue with Radio 10. Meanwhile, Gabriel Rubinstein Secretary of Economic Policy, clarified on the social network intervention in the CCL/MEP “which we hope can come down and move away from the recent ‘panic’ values.”
According to official sources, the swap extension has no impact on the International reserves, because they were always considered. This impacts the net reserveswhich are what the market calculates.
Dollar: why the expansion of the swap is key
With less than four wheels until the general elections, the demand for coverage remains high. The CCL again remained between $960 and $980 during the trading session, closing around $965. Following recent regulatory changes, the market appears to have found a “rest” slightly below $1,000 while continuing to boost prices of other hedged assets (metals, oil and energy producer stocks, etc.) that act as a “hedge” in the face of an electoral scenario with high uncertainty, as stated by Delphos Investment in its recent report.
The market indicates that there was no money left from the first tranche of the swap (less than US$1,000 million) and that is why the activation of this second tranche is essential, especially “in this very strong dollarization scenario that we have.”
As clarified by Central bank, “In January, a first tranche was activated for 35,000 million yuan and on this occasion a second tranche for 35,000 million yuan was activated immediately. 47 billion RMB (equivalent to $6.5 billion).
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So far in October, Anker Latin America estimates an intervention in the financial FX of around $85 million per day and sales in the MULC, mainly for imports and debt service payments, of US$80 million daily. “The latest restrictions on the operations of banks and companies, the increase in BCRA rates and the extension of the special export dollar to other agricultural products are measures that attempt to reduce the rate of loss of reserves, which is not sustainable for more than a few weeks.”
“In recent days we have observed a highest volume operated in yuan in the MAEso it is possible that the use of swap has increased with China after the announcement of the activation of the second tranche. Although this does not imply a reinforcement of liquid reserves to intervene in financial FX, if it can contribute to removing some pressure on the exchange rate if part of the demand can be channeled in this way.
According to the CMF, “it seems more likely that the yuan will be used to try to somehow contain the cash rise (CCL) and, at the same time, maintain performing the debt with the IMF. Between now and the end of the year there are maturities of almost US$3,500 MM and there are not enough SDRs to make the payment, so it is expected that swap funds will be used to meet said obligation. It is likely that this new measure will somewhat contain the rise in cash in the electoral process, although the financial dollar market is sustained in patches and could respond like a pressure cooker when the restrictions are removed. regulations and interventions. “The preference for the dollarization of portfolios is maintained to get through the elections.”
Source: Ambito
