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Blue dollar: what can be expected with the price after the inflation data and the new measures

Blue dollar: what can be expected with the price after the inflation data and the new measures

With the 8.4% that marked the inflation of April, the market remains expectant before the new announcements from the Ministry of Economy and the definitions that are expected of the Central Bank in the next few hours in relation to the rate of devaluation of the official dollar. The package of measures to stop the high rise in prices seems to have left “a little taste” and the consensus that prevails among analysts is that the strategy to avoid a new escalation in the exchange market will be the rise in rates, the reinforcement of the controls and interventions in financial dollars. The question then is, will it be enough?

Let’s do a little revisionism. More than two weeks ago, the blue dollar reached $495 and reached the number that seemed like a ceiling during the day: $500. Since then, the parallel has been reducing the increases due to the intervention of the Central Bank to reassure financiers and discourage the purchase of the informal that was well above the MEP and even surpassed the Qatar Dollar at one point. In this context, the CPI data fully matches the expectation for the future regarding what will happen to the exchange rate scenario. What factors need to be closely monitored and what effect will the new announcements have?

Although in the last week the blue reduced its volatility, it maintains its bullish streak and accumulated an advance of $7 in the last 5 days. If we look at what happened to the parallel dollar in the last 4 months compared to inflation, this exchange rate has been climbing above the CPI (36% vs. 32% inflation) while the MEP and CCL are below the price index.

For the financial analyst christian buteler in dialogue with Ambit The data released by INDEC “does not help to achieve stability in the exchange rate.” “Today the exchange rate is regulated, controlled, by the intervention of the Central Bank. Although the Central Bank does not directly intervene in the blue, what happens is that with an intervened MEP, the gap that exists with the blue does not grow too much, because let’s say who needs to buy, will find a way to buy in the MEP and not have to validate such a high price”, he asserted.

“As long as there is that intervention, that type of control over this market, more or less the dollar will have a slightly more limited evolution. What worries me the most, beyond the inflation data, is obviously the issue of issuance, because those are precisely the surplus pesos with which they later charge you on the exchange rate. So that is what I really see as a problem for the coming months because inflation is maintained”, concluded the economist. As for the new announcements, he was blunt: “The new measures have the smell of old measures.”

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From CEPA, they estimate that the use of reserves in interventions between the end of April and the first week of May were around US$290MM, a loss that demonstrates the difficulty of containing demand and, at the same time, of retaining the few genuine dollars that come in .

One of the tools that the Central still has up its sleeve is the use of swaps. For the consultant, US$5,000 MM of the swap could be used to pay for imports between April and August. “Therefore, the Central would have more intervention capacity (in the MULC / CCL). In turn, according to what was reported by the chief of staff in the Senate, they are not selling public organizations (AL35/AE38 of FGS),” he said. Florence Gutierrez, ECA economist.

“Going forward, we must pay attention to the entry of dollars by the agro-export complex, which are the genuine dollars that allow us to intervene in the gap. This inflow of foreign currency, what is discussed with the IMF and the dollars that may enter from multilateral organizations is what will allow us to get to August by avoiding exchange rate fluctuations”.

In this complex landscape, Mariano Sanchez Romero, Alphacast’s Chief Economist stated that “dealers seek hard currency coverage, in a “market” that is intervened and under severe financial repression. Having the gap of the MEP and CCL below 93% and that of the blue at 105% is not genuine”.

“In spot, The firepower of the BCRA is limited to net reserves (it does not have), selling bonars against pesos (it breaks parities) and regulations that prevent it from operating (of this there is a lot). In futures it is another matter, there you have a little more margin. The dollar futures markets have not yet overheated as much as they did in the FCI CER run last June,” Romero explained.

For the economist, the Central Bank will seek to maintain its course “by blood and fire” until STEP and avoid a sudden jump in the exchange rate. What does it mean? “accelerate the crawling peg – one of the issues that makes financial agents uneasy after the communication of the measures-, sell at the close of each MEP and CCL session to lower the last price of the day and intervene in futures”.

As for the novelties, Sánchez Romero also showed reservations and highlighted its limitations: “I already say that it will not work, it is nothing that they have not done before and it will not have results. In addition to the fact that they apply rate increases in a market that is subject to friction on all sides. The measures may have an effect but in the short term.

Source: Ambito

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