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The dollar pierced the level prior to the STEP and the market analyzes scenarios towards exiting the stocks

The dollar pierced the level prior to the STEP and the market analyzes scenarios towards exiting the stocks

The appreciation of the peso against the dollar continues at a firm pace in line with the exchange rate anchor policy to contain inflation that the Government applied after the December megadevaluation. In recent days, this trend received an additional boost following the devaluation of the real and, in general, the strengthening of the US currency on a global scale. So this week The multilateral real exchange rate (TCRM) breached 95 points and was below the level prior to the 2023 PASOthat is, prior to the devaluation that Sergio Massa applied the day after the primaries by imposition of the International Monetary Fund.

Analysts estimate that, if the crawling peg (daily microdevaluations) rate of 2% per month is maintained, in a short time the effect of the 118% exchange rate jump implemented by Luis Caputo and Santiago Bausili on December 13. In this framework, and at the dawn of the key period of the thick harvest, the market evaluates different scenarios for the official exchange rate for the process of opening the stocks exchange rate, which (with the alleged new debt with the IMF for now in the freezer) has an increasingly diffuse application period.

He TCRM It closed this Thursday at 94.6 points, according to BCRA data. So, accumulates a drop of 67.58 points since the last peak, which was reached on December 14 after the megadevaluation. This exchange rate appreciation led to the official dollar being located today at a level even lower in real terms than it was on the Friday before the 2023 STEP (95.7 points) and to the 22% exchange rate jump imposed at the time by the IMF.

In the last days The process accelerated due to the strengthening of the US currency on a global scale. For example, the real was devalued: the dollar went from trading in Brazil at 5 reais on April 9 to close at 5.20 ten days later.

Both Javier Milei and Caputo have recently insisted that they do not plan to modify the 2% crawling peg in the short term.. Even though different voices from the countryside are pressing for an improvement in the value of their grains before forcefully liquidating the large harvest, officials say that the dollar is not behind. The truth is that the Government decided to give priority to slowing inflation from very high levels with the acute recession (via income liquefaction) and exchange rate appreciation as pillars. A strong rise in the dollar would result in an overheating of the CPI, but official policy crosses a narrow path.

However, this Friday IMF, with his usual sinuous speech, gave a signal about what he intends for the dollar. The regional director Rodrigo Valdés, in a press conference after the meetings with the Argentine delegation that traveled to Washington, avoided being assertive on the matter but said that The real exchange rate must “ensure durability and stability in the accumulation of reserves.”

“If the 2% monthly rate is maintained, towards the end of June the real exchange rate will be in line with the 2016-2017 minimums, which are the lowest values ​​that Argentina has had with a unified exchange rate since the exit of the Convertibility,” stated a report from the consulting firm 1816, one of the most read in the offices of the City of Buenos Aires. This projection was made based on a more optimistic assumption than the one shown in the BCRA’s last Market Expectations Survey: inflation of 9% in April, 7% in May and 6% in June.

Official dollar and exit from the stocks

In this context, the market evaluates different exchange scenarios in view of the opening of the stocks, a Government objective whose materialization date becomes increasingly less clear. In Washington, where Caputo and part of his team traveled this week, they say that it is still premature to think about a new program with extra debt like the one Milei intends to lift restrictions on the dollar without exposing itself to the risk of not being able to face a eventual run. Meanwhile, it is committed to further accelerating the liquefaction of the BCRA’s remunerated liabilities with the recent reduction in rates.

In that sense, Valdesat the same press conference, said that the lifting of the stocks “must be carefully considered“taking into account the extent of the imbalances that the economy still has, the reserve buffers that have to be built and the strength of the policy framework.” In addition, the Fund official hinted that an exit scheme is being negotiated. gradual: “It is not just one, but it is a set of different measures that must be reviewed. Some of them are quite important for growth, and some are less important for growth. The sequence is not trivial in terms of how to review those measures, and we are actively discussing with the authorities about alternatives and better paths.”

Based on the assessment reflected in the TCRM, a recent report by the Institute of Applied Economics (IEA) of the Universidad del Este de La Plata stated that An “ideal scenario” in which exchange rate unification does not imply a devaluation jump is unlikely of the official exchange rate. And he exposed two hypotheses: one in which the exit from the stocks occurs with a large devaluation and another with a moderate jump.

“In the first case, an extremely delicate social scenario would be generated where an additional drop in income and activity in the first phase of the government would be added, as a result of a new jump in inflation as was already experienced in the first months of the Government. This political fragility could be transferred to the markets and change the expectations of the agents, modifying the support received until now. That is to say, unification at an excessively high exchange rate could seriously jeopardize the program’s chances of success“, stated the IEA and focused on the deterioration of salaries and living conditions during recent months.

On the other hand, he considered that an exit from the stocks with moderate jump: “A dollar similar to the one that Néstor Kirchner had during his mandate would be trading today at $1,447, a value that is not too far from the financial quotes of the dollar. That is, the social situation does not allow large jumps in the exchange rate.”

For its part, 1816 He weighed different factors of the current situation that play in favor of thinking that the Government could unify before the middle of the year (liquefaction of monetary aggregates, contractive role of the Treasury, need to avoid a large devaluation jump, recovery of reserves and calm of the CCL) and others that support the idea that it will have to wait longer (BCRA rate cuts, bond prices suggest that the CCL level is not balanced and growth in commercial debt).

So, concluded that it is most likely that there will be a gradual exit from the stocks (in line with what was mentioned by Valdés), in which certain restrictions on the CCL are first lifted in search of a “free” value: the CNV rule that requires corporate purchases of financial dollars for more than $200 million, the limit to dollarize leveraged in sureties and Communication “A” 7340 from the BCRA (which requires banking the MEP/Cables dollars). These are three regulations that are on the list of the economic team with rules to be removed, although still without an application date, as Ámbito anticipated.

Afterwards, and before the middle of the year, the consultancy foresees that the 80-20 blend will be eliminated for exporters (in line with what was agreed with the IMF) “to see how the CCL moves without that offer.” “Only then could they lift the MULC/CCL cross restriction (for Q3?), making the CCL completely free. Finally, access to the Official FX would be released and the COUNTRY tax (Q4?) would be eliminated,” 1816 envisioned. Although it did not rule out the possibility that the Government wants to “surprise with the times” and anticipate market expectations.

Even within its base scenario of gradual exit, the report considered that the cash with liquid could have touched a nominal floor at current levels. “There is not much room for the CCL to fall in nominal terms, given the current minimal gap versus the importing exchange rate. Due to this gap, importers have incentives to ‘get off the MULC’ (and pay everything via CCL without restrictions),” he explained.

Regarding the official exchange rate, 1816 hopes that, if the release of access to the MULC occurs closer to the end of the year, the BCRA will begin to accelerate the crawling peg in the coming months: “Otherwise, a very big leap would be necessary to unify. It is evident, however, that there is a trade-off here: if crawling is accelerated early in time, the disinflation process will be difficult. If, on the contrary, the crawling is maintained, when the unification leap occurs there will be a relevant inflationary acceleration.” For now, the future dollar market discounts a rate of between 4.1% and 5.7% for all months starting in May.

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Source: Ambito

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