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Sunday, April 2, 2023

With accelerating inflation, what will happen to the dollar and where should it be invested?

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It is very difficult to think of low inflation without sound fiscal policy. The Argentine economic history gives us clear signs that whenever the fiscal deficit was important, inflation was high. This occurs because Argentina does not have external financing, ergo the deficits are financed with money issues by the BCRA.

Where to invest?

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Despite of high inflation dataFor short-term placements, we continue to prefer fixed-rate bills, since with average yields of 116%, they continue to yield much more than bills when we take into account inflation projections for the coming months.

What’s going to happen with the dollar?

If we analyze relative prices, the Official Dollar should trade 27% above current prices. That is the maximum discrete jump that we expect for the official dollar. Now with the income from international organizations and the measures to prevent the loss of reserves, it is a possibility that is fading.

We also see a sizeable difference in the rate of the December dollar futures contract of this year, indicating that the market is beginning to price a devaluation as soon as the next administration takes office.

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Source: Ambito

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