Key for investors: What strategies do experts recommend to deal with volatility in the dollar?

Although the Government announced that it had a surplus for the sixth consecutive month, The fiscal anchor no longer seems to be enough to calm market fears. Especially since they are still digesting the fact that the Government confirmed that it will intervene in the exchange rate of parallel dollars to reduce the gap. A measure that had its counterpart for two days but that, on this day, already had a rebound.

Given this, one might ask, as you can see City experts discuss these measures and what strategies exist to deal with the volatility of the dollar.

Government measures: experts’ opinions

“The Government gave clear signals of the direction: the dollar official will continue the “crawling peg” at 2% and they are waiting for inflation to converge to that level. They are also doing everything possible to tie the amount of pesos to current levels. In fact, tomorrow, the end of the process should be resolve the issue of puts, which is the last free leg of monetary emission“, he told Ambito, Alejandro Bianchifounder of Investment advisor.

It should be noted that another of the measures announced by the national administration, The Central Bank of the Argentine Republic (BCRA) will offer banks and financial institutions the possibility of rescinding liquidity options on government securities in order to resolve the “puts” they have in their possession. The entity will buy back these insurance policies at a price equivalent to the premium they paid at the time, adjusted for the inflation index.

This measure complements the one announced over the weekend when a new change in the monetary scheme was reported, which implies an official intervention: Everytime that The BCRA buys dollars in the Single and Free Exchange Market (MULC)the issuance of pesos generated by this operation must be sterilized with the sale of equivalent dollars in the Cash Settlement (CCL), in order to reduce the gap and keep the monetary base stable.

“This new scheme raises an aggressive measure because it makes the accumulation of reserves slower. But the accumulation of reserves continues to happen, despite this, and you manage to keep the amount of pesos fixed. It is not that you have an extension of the convertibility exchange rate, which is a reference for the market.“, Bianchi added.

Strategies to deal with exchange rate volatility

“We usually have moderately diversified portfolios that, in some way are dollarizedand They are effective in times of exchange rate volatility“, he told Ambito, Rafael Di Giornodirector of Proficio Investmentand analyzed: “There are an attempt by the Government to lower the financial exchange rate, They can achieve this in the short term, but it is very difficult to achieve in the medium term because there are no surplus reserves. I would stay calm with any dollarized asset“.

For its part, for Andres Reschini of F2 Financial Solutionswill depend on each investor and their own risk profile. “Generally, This volatility or instability brings more uncertainty and the most logical thing is that most of the public goes out to try to cover themselves rather than take risks.“, he expressed in a conversation with this medium, but he also said that “There may be investors who try to make a carry trade betting that the Government will be successful in its efforts to combat the gap.”

In this regard, he mentioned that to seek “coverage” the chosen instruments are Cedears, buying MEP dollars, instruments linked to the CER, and dollar-linked bonds.

Bianchi, for his part, added: “Despite the volatility, the exchange rate should converge to $1,000 by December, If the plan is successfuland, in that sense, perhaps Fixed-rate peso alternatives such as Lecaps are the most interesting. Besides, If the country risk is reduced in the coming months, the fall in bonds could be recovered in dollars“.

Finally, from Adcapanalyzed the possible “risks” of the measures and stated: “The exchange rate lag remains, and lowers priority to the accumulation of reserves, which was one of the main pillars of the rally in the first six months. As the market sees a drop in reserves, would again seek coverage of exchange rate jumps through dollar linked bonds.”

It should be noted that The Government also announced that the Treasury will directly purchase dollars with a fiscal surplus – without issuing pesos. “The measure is contractive in terms of economic activity because it contains the increase in imports which helps maintain the trade surplus but may start to hurt the president’s image in terms of unemployment“, they added.

In this regard they mentioned that this can bring volatility in the bond market: can there will be uncertainty until the market actually begins to see Treasury dollar purchases. “What opportunities do we see? Today from our point of view, In the short term, Lecaps will continue to be the star of the market, and the Actions are at purchase price, for a long term“, they closed from Adcap.