Much of the technical details of the agreement will be “confidential”, as confirmed by official sources to Scope. However, this medium was able to find out that The swap with the US will not have an immediate impact on reserves.
According to the monetary authority, the agreement seeks contribute to the macroeconomic stability of the countrywith focus on preserve price stability and promote sustainable economic growth. The announcement occurs in a context of high demand for exchange coverage and increasing volatility in local markets, in the run-up to the general elections on October 26.
As far as he could know Scope from sources of Central Bank (BCRA)and in line with the accounting criteria applicable to its financial statements under current Argentine professional accounting standards, The impact on international reserves is recorded only when each tranche of the swap is activated. Currently, the BCRA has a solid balance sheet and ample liquidity, and the disbursements of each tranche will be defined according to the needs that the monetary authority evaluates in the future.
Unlike the swap with China, this new agreement presents some technical peculiarities that determine different accounting. Nevertheless, What is relevant is that both mechanisms expand the set of tools available for the implementation of monetary and exchange rate policy.
As usual, the conditions of the agreement are kept confidential, in order to preserve incentives and avoid arbitrations between investors and participating countries. Finally, it should be noted that Once disbursements have been made, the funds will be freely available, without restrictions on their use.
The most important focus, probably of the announcement, is that this agreement contemplates the possibility that those US$20,000 million can be used to intervene in the exchange market.
From the BCRA they highlighted that the agreement ““It is part of a comprehensive strategy that reinforces Argentina’s monetary policy and strengthens the Central Bank’s ability to respond to conditions that may lead to episodes of exchange or financial volatility.”
What is a currency swap
A coin swap or currency swapis a financial agreement between two central banks to exchange a certain amount of one currency for another, with the commitment to reverse the operation in the future. Initially, the swap works to increase gross reserves and does not impact net reserveswhich are the reserves that the BCRA has freely available to use.
However, a country can request the activation of the swap that enables you to use a certain amount of currency to carry out operationshow to pay debts. In this case, once the agreement is finalized, the bank that requested activation must return to its peer the amount of money used plus interest. It is worth remembering that this interest begins to be applied only in the activated sections, and not in the total amount that is announced.
It is worth remembering that Argentina has a swap agreement with China, with an activated tranche for US$5,000 million beginning repayments in mid-2026.
The Swap announcement: can it change expectations?
Traders do not expect the announcement to change market sentiment. “I don’t think it will have a relevant impact since it would only be a confirmation of an event already announced,” said operator Gustavo Ber.
For his part, economist Iván Carrino added to Ámbito: “Maybe it has a positive impact, but I don’t know. It may already be discounted. In any case it formalizes what had already been announced and guarantees a greater amount of dollars a few days before 26-O. It helps to keep things calm.”
“I think it is a good sign, it reinforces the firepower of the BCRA. But I still think the market will still be cautious and volatile until the elections. The uncertainty about governability is not cleared up with the swap nor with regard to the rest of the support package and what it will be like after October 26,” added F2 Soluciones Financieras analyst Andrés Reschini.
“We understand that the signing of the agreement is positive and even more so in this context. In addition, it gives a firm signal that will help moderate expectations in the short term (even post-election) and provide room for maneuver to the BCRA to manage tensions in the demand for dollars, in a scenario where each external signal is amplified by a hypersensitivity that has been experienced for weeks in the market. And finally, as we have been highlighting, the Government is giving signals that it understood the notice in the PBA elections and is thinking in the long term: with agreements like this that provide predictability and exchange and financial stability,” said Pablo Lazzati, CEO of Insider Finance.
Source: Ambito
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