The Government seeks to obtain a result that allows it to calm expectations of devaluation, which in recent weeks forced it to intervene with various tools.
The Government came to these legislative elections using all its artillery to contain the exchange rate within the floating bands, amidst market doubts regarding the sustainability of the scheme. The first signs of the results are encouraging for the ruling party, something that is reflected in the price of the crypto dollar.
One hour after the close of the elections, The crypto dollar operates at $1,504which reflects a drop of 6% in the last 24 hours. It is worth remembering that the wholesale official closed on the last business day at $1,492, very close to the ceiling of the band.
After casting his vote, the Minister of Economy, Luis Caputo, assured that, whatever the result, neither the economic plan nor the exchange rate scheme will undergo changes. “The scheme continues. I can’t say if it is $1,500, $1,400, $1,300, but it will always be within the ranges,” he stated.
The possible scenarios for the dollar, depending on the election result
In the run-up to the elections, analysts predicted three possible scenarios for the future of the dollar: one derived from a favorable result for the Government, another with a sharp fall for La Libertad Avanza (LLA), and one in between.
The first of them could give air to the economic team for the continuity of the band regime without so much pressure from the demand side. On the contrary, a very adverse result for LLA increases the chances of a breakdown of the scheme.
In dialogue with Ámbito, economist Jorge Neyro predicted that the most feasible thing is that the intermediate scenario occurs. If that happens, he speculated, the bands would continue, but possibly with a higher floor and ceiling.. “Floating would be positive, but I think that in the short term the Government will want to avoid the volatility that this would imply,” he said.
Broadly speaking, the doubts of the specialists, in the event that there is a change in the scheme, is whether the transition will be towards an expansion of the bands or towards a managed float. In addition, the expectation prevails as to whether the US government will continue participating in the domestic Free Exchange Market (MLC).
The Government intervened strongly to contain the dollar between the bands, with help from the US
It is worth remembering that the US intervention was one of the many tools that the economic team used to prevent the currency from escaping from the upper limit of the bands. According to estimates such as those of Delphos Investment or Fernando Marull & Asociados, The hard currency coverage in recent weeks represented close to US$20 billion.
Approximately US$2,000 million were supplied with sales from the North American Treasuryto which was added the participation of the local Treasury and the Central Bank (BCRA), as well as intervention in futures and Dollar linked securities (the latter being the one that represented the most dollar flow).
Source: Ambito
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