Three financial events will focus attention after the elections and will be key to defining whether the exchange rate calm continues or the pressure on the greenback returns.
Beyond the result of this Sunday’s elections, the fate of the dollar In the short term it will be played in three key moments that will define whether calm is consolidated or exchange pressure returns. Although the market climate will largely depend on the political support that the Government obtains, the exchange roadmap will begin to be revealed with three events on the financial calendar: the expiration of a Lelink, a new Treasury tender and the closing of future dollar positions. Together, they will set the pulse of the market and allow us to anticipate what the next move will be in exchange matters.
First key event: the expiration of a Lelink
On Tuesday, the lelink D3105 expires, which was highly demanded by the market due to its implicit performance that considers an exchange rate value of around $1,420. According to a report by GMA Capital, the voracity of coverage occurred because the market discounts changes in the exchange and monetary scheme. “This statement is based on what the curves say: the exchange rate breakeven In December with Lecaps it is close to $1,600, while that in mid-February exceeds $1,700. These are the values that leave the strategy carry trade neutral And since they are above the projected ceiling of the band, it would imply that bondholders expect calibrations in the exchange setup,” he added.
Taking into account the expiration of that Lelink, a possible change in the exchange rate scheme around October 31 would imply an additional risk for holders: being exposed to a jump in the exchange rate without the protection that this instrument offers today, for three days.
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2. New Treasury tender
The Treasury tender on October 29, scheduled for the first Wednesday after the elections, will be a key test for both the Government and the market. That day, almost $12 billion of debt in private hands expires, including $3,231 million in face value of the Lelink D3105, whose price will be defined on October 28, just two wheels after the elections.
3. Future dollar expiration in October
On the 31st of this month, the future dollar contracts that operated below the ceiling of the exchange band expire. On this point, the reading predominates in the City that, if an exchange rate correction occurs, it would not occur this month.
The hypothesis is based on the perception that the Government would not be willing to assume the cost of paying the “difference” for that contractwhich expires next October 31. According to the estimate of Consulting Firm 1816, this contract represents 20% of the Central’s total futures sold position in A3, however it warns that the “The market will be expectant of the operations of the monetary authority during the rollover.”
In summary, the calendar suggests that there would be no disruptive movement in the exchange rate on the Monday after the elections, unless the result significantly alters market expectations and force bets on the dollar to be recalibrated.
Source: Ambito
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