Once again, the market looks at the level of reserves of the Central Bank (BCRA) as one of the key variables to test a response. According to a report by Personal Investor Portfolio (PPI), net reserves they improved US$1,070 million in October, although they continue in negative territory due to -US$6,305 million.
At the same time, he warns that both the BCRA’s net reserves and liquidity will fall by around US$770 million in the next week, for the quarterly payment of interest with the IMF. “Likewise, we could see an additional decrease if the purchase of the Treasury from the BCRA for US$ 2,700 million is completed to ensure the capital payment of the Globales and Bonares in January,” complements PPI.
The wavering dynamics in the acquisition of foreign currency by the BCRA is the factor that raises doubts about the sustainability of the exchange scheme and hinders the projection of consolidated stabilitydespite the support that has been strongly demonstrated in recent times.
Why does the BCRA buy dollars?
The BCRA closed a month where it bought u$s 1,530 milliona record figure for an October since records began (2003) when measured in current dollars. According to PPI, thanks to the BCRA’s record purchases, gross reserves rose u$s $1,445 million in October, from US$27,172 million to US$28,617 million.
In that sense, the consultant Romano Group (RG) highlights the reasons why the entity represented by Santiago Bausili managed to buy dollars in a seasonally difficult month to do so.
He bleach positions itself as the protagonist of this dynamic. “There was a strong influx of dollars into the system, generating greater lending capacity in dollars.which are settled in the exchange market.
Since August 15, private deposits in dollars have increased US$11,860 millionwhile in the same period loans to private individuals in dollars increased US$ 1,000 million”, they explain from RG.
Furthermore, according to Romano Group, an “interesting” phenomenon is happening in the market to address, which is the following: dollar linked hedging cost operates with positive rates (both Treasury securities, corporate debt and synthetics).
“This dynamic responds mainly to a market that believes in the official message in terms of crawling and without discrete leaps of magnitude on the horizonand with fixed rates (in the market and in tenders) above said expectations. Ergo, the devaluation rate becomes the “worst” rate of return between fixed rate and devaluation,” the consulting firm argues.
Carry trade: today’s profits, tomorrow’s uncertainty
In any case, the flattened dollar generates a strong attraction for the carry trade operation, which some economists point out as an operation that is difficult to sustain due to the level of returns it is generating.
As explained in this note, the economist Nery Persichini highlighted that the annual return on carry trade bets accumulated until October 15 reached 31.8% if the BADLAR rate (which remunerates deposits of more than $1 million with a term of 30 to 35 days) and the evolution of the dollar counted with settlement (CCL) are considered.
When compared to what has happened in recent decades, The 31.8% return in dollars accumulated so far this year is only surpassed by 2003 (39.4%), the year following the exit from convertibility.
In fact, only so far in October the “carry” left a hard currency profit over 6%Persichini estimated. “The streak of recent months is a statistical rarity (it moves away from the average values),” said the economist on his account on the social network X.
For this reason, the chief economist of the consulting firm Vectorial and former vice minister of Economy Haroldo Montagu warned in this interview that in this burning “there is a kind of Ponzi”, by making a profit and getting out quickly “because then you don’t know what is going to happen.”
“At the time with Macri we saw a very strong capital inflow and very high real rates, that is not happening now, so you are controlling the ball in some way. But that may change as they dismantle regulations. So, a scheme of this style is not sustainable even for the investors themselves.”, highlighted the economist.
In this context, the BCRA decided to lower the monetary policy rate from 40% to 35% annual nominal rate (TNA). The active passes from 45% to 40% TNA.
This means that the rate goes from 3.33% to 2.91% monthlywhich in part makes this carry trade operation less attractivealthough it is still positive in dollars.
The Government is committed to the “2-2-2” convergence plan
Likewise, official management makes its effort to align expectations by maintaining the “convergence plan”. According to EconViews, the market is “increasingly convinced” of such a strategy, and it is reflected in the rates of Lecaps and Boncaps -3.5% for short curves and 3% for longer ones-, dollar futures accompanying the vision of the crawl at 2% prolonged and the gap falling to 15% during the last week.
In turn, the fiscal commitment of the Government and the confidence that next year’s maturities will be paid explains, according to Andrés Borenstein’s consulting firm, that the country risk is at 950 points, while at the same time they project a drop in the 600 points by 2025 if the Government gets out of the trap.
“The Government announced this week that it bought the dollars from the Central Bank to pay January capital maturities for about US$2.7 billion. A few weeks ago I had done the same with the interests. This implies more negative net reserves that will surely be offset by the repo in the future.“, they detail.
The possibility of completing a repo wavered during the last week, since Milei had anticipated the completion of this loan as a resource to meet January obligations. Do you mean the economic team couldn’t get it?
Federico Furiase, advisor to the Minister of Economy, Luis Caputo, had to come out to respond: “this operation does not replace the repo that the BCRA analyzes as part of its reserve management strategy. The advance purchase of the USD from the BCRA contracts the broad monetary base capped at $47.7B,” he clarified on the X social network.
When does financial optimism transfer to the domestic market?
Meanwhile, in October the liquidation of agricultural currencies exceeded US$2.5 billiona record for this time of year, where they are usually settled US$1.7 billion.
It remains to know if The greater income of dollars due to the financial summer and the boost from agriculture will contribute to the reactivation of the internal marketwhich was far from the V-shaped recovery, although it outlines inter-monthly improvements ahead of the next September data. However, the consensus among consulting firms establishes a drop in GDP close to 3.5% for all of 2024including the improvement of the agricultural sector after a severe drought in 2023.
Source: Ambito
I am an author and journalist who has worked in the entertainment industry for over a decade. I currently work as a news editor at a major news website, and my focus is on covering the latest trends in entertainment. I also write occasional pieces for other outlets, and have authored two books about the entertainment industry.
