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The dollar is on a three-day bull run, can it break above $38 and stabilize?

The dollar is on a three-day bull run, can it break above $38 and stabilize?

He dollar today it appreciated by 0.32% and has already accumulated three consecutive days on the rise, accumulating a rise of 0.76% so far this month, something that can be attributed to the strengthening of the US currency worldwide, but also to the monetary policy that drives the Central Bank of Uruguay (BCU).

It is that, according to economists consulted by Scope.com, the reduction of interest rates decided after the meeting of the Monetary Policy Committee (Copom) was a determining factor for the current context, although they still called for caution. That being the case, can he dollar return to 38 pesos and remain stable above that range?

When analyzing the behavior of the US currency, Diego Rodriguez, managing partner of Gastón Bengochea & Cía. Corredor de Bolsa, specified in a dialogue with this medium that “in recent weeks we have seen some rebalancing in the investment portfolios of clients, reducing exposure to the peso and returning to the position of the dollar.”

For Rodriguez, the situation is explained “in part by the rate differential, since the nominal yields of the placements in pesos have fallen in response to the reduction of the MPR (Monetary Policy Rate)”.

At the same time, he noted that “the yields for short and medium-term placements in dollars (Treasuries and IG corporates) remain high, around 5% – 5.50%.” In this line, the economist specified that “there is a ‘local carry trade’ that would be beginning to disarm only because of a more favorable rate differential of the dollar against the peso.”

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Can the dollar stabilize above 38 pesos?

Faced with the query about the future behavior of the dollar and its appreciation above 38 pesos, Rodriguez argued that “the survey of the BCU He says so”, echoing the BCU report that located the value of the currency at 38.05 pesos for August and that it will reach 39.76 pesos in the next 6 months.

He was more cautious Giuliano Cantisani, senior consultant of the Economic Analysis and Forecasting Service in C.P.A. Ferrerewho in dialogue with Ámbito.com stated that “for the moment, the dollar accumulates only three daily increases compared to the Uruguayan peso.”

Along the same lines, he maintained that “it is too short a time to assume that it is a Change of trend” and he recalled: “Episodes of this type have been seen in previous months that have been subsequently reversed.”

However, he admitted that stabilization above 38 pesos is possible. “While we do not rule out that the dollar can reach 38 pesos, an abrupt depreciation of the Uruguayan Peso”, warned.

Thinking about the future, he anticipated that the decision made by the BCU at the next meeting of the Copom “It will be key to defining a future trajectory for the exchange rate.” Still, he remarked: “In any case, we don’t expect any abrupt moves.”

The behavior of the dollar internationally

At regional level, Cantisani stressed that “Uruguay it has managed to separate itself from regional instability.” In any case, he referred to the importance of Brazil and maintained that “the real continues to be an important reference for the Uruguayan peso.” In this sense, he considered that the Uruguayan peso has evolved in a similar way to that of the rest of the countries in the region, remaining in the middle of the table in terms of nominal appreciation with respect to the dollar ”.

Regarding global trends, he highlighted that the bloomberg dollar index (DXY) that compares the dollar against a basket of currencies from advanced countries “has been accumulating several weeks of rises, which would indicate some strengthening of the dollar internationally.”

For the economist, “this is explained on the basis of some economic activity data that has been better than expected in USAwhich has led to an expectation that the interest rates of the Federal Reserve stay high.”

Along the same lines, he stated that “although the rate hike cycle is expected to come to an end, no cuts are anticipated in the near future, which provides some strength to the US currency.” To that, he added that “sluggish growth in other advanced economies also supports a strong dollar.”

The dollar as a “refuge from an uncertain global environment”

For Rodriguez, “At the international level, the dollar it is acting as a haven from a more uncertain global macro environment.” And he gave as an example “a eurozone that could enter a scenario of stagflation (stagflation, which is persistent inflation with recession)”.

Elaborating on this scenario, he reviewed that “China It has disappointed with its expected post-reopening rebound in activity, added to a challenging geopolitical scenario.” In short, he indicated that “all this should favor USA and dollars invested in security at positive nominal and real rates”. At that point, he highlighted that US bond yields (in dollars), which he described as “super attractive”, which favors the dollar.

Source: Ambito

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