Dollar under pressure: demand for exchange rate hedging grows in the market

Dollar under pressure: demand for exchange rate hedging grows in the market
Dollar under pressure: demand for exchange rate hedging grows in the market

In five trading days, the dollar-linked FCI had net subscriptions of $152 billion. In futures, quotes eased, but the implied rates are well above the 2% “crawling peg.”


The exchange rate turbulence, fueled by official announcements that did not meet the expectations of economic agents, overheated the expectations of devaluation. Although the parallel dollars took a slight respite (with ups and downs in the last few days), Demand for foreign exchange hedging continued to rise. This was reflected in the mutual funds (FCI) dollar linkedwhich received a significant flow of subscriptions in recent days.

The market is looking for certainty regarding the dismantling of the restrictionswhich the Government is avoiding for the moment. And in light of the abrupt halt in the recovery of reserves in June and the sharp expansion of the exchange rate gap, the idea that any opening will imply a significant rise in the exchange rate has gained ground. Even though Minister Luis Caputo tirelessly confirms that he will not move from the “crawling peg” of 2% per month.

In this context, the FCI dollar linked were the star of the mutual fund industry in recent days. These are investment vehicles that are subscribed with pesos, but are invested in assets linked to the evolution of the official exchange rate. Therefore, the capital is updated in the event of any devaluation or exchange rate slippage.

According to calculations by Portfolio Personal Investments (PPI), During the last five rounds, this type of fund received net subscriptions of $152 billion. PPI highlighted that, unlike the financial dollars and the blue dollar, which took a breather on Wednesday, during that day the FCI dollar linked continued to be in demand and had net inflows of $17 billion.

“There is a lot of uncertainty and investors are looking for cover.. There is no certainty about the dates for the release of the restrictions or the way in which it will be done. That is why consultations and demand for linked dollars have been activated,” an operator told Ámbito.

Dollar: market expects acceleration

In the other route par excellence for exchange coverage, the market of dollar futuresthere was a somewhat different behavior. At the close of last week, prices had also risen sharply, but as of Tuesday they were coupled with the respite taken by the cash settlement (CCL) and cut the increases. This Thursday they returned to Falling contract prices in almost all time frames.

However, Forward rates (the monthly variations in the official exchange rate implied in the contract prices) They barely moved. At the close of Thursday were between 4.1% (for the shortest term) and 5.6%. This implies that the market continues to price in a higher rate of devaluation than the 2% that Caputo promises to maintain, something that was reaffirmed in the projections included in the advance of the 2025 Budget sent to Congress.

“Although the price to pay for coverage has dropped compared to two wheels in the back, The forwards are very far from the 2% ‘crawling peg’ (as they were until mid-May), denoting the uncertainty of investors and those seeking coverage,” said PPI.

Source: Ambito

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