Intervened dollar: how far the BCRA could take the gap, according to market projections

While the market watches closely The new LEFIs that replace passive passeswithin the framework of the new monetary regime, on the other side of the debate there is a topic that was very relevant last week: the exchange rate. Basically, the market continues to evaluate the implications for the intervention in financial dollars and operators project how far the Central Bank (BCRA) could take the gap.

It is worth noting that on the Monday after the announcements, The CCL with GD30 fell 6.6% to $1,319, while the MEP lost 7.5% to $1,309. “As the days went by, both prices rebounded until they reached $1,330, where the BCRA tried to put a ceiling, so Their respective gaps closed on Friday at 44% (vs. 53% the previous week)accumulating a drop of around 6.5% in the week,” they explained from Cohen.

The search for the Government with this it is clear: close any type of tap that involves issuance and the monetary base remains static. In addition to finishing eliminating passive passes, he also managed, last week, reduce by almost 80% the puts with the banks.

In this context, the market is asking itself: To what extent does the Government plan to sterilize the pesos by selling to the CCL, and what is the minimum gap it has in mind?

City gurus weigh in on move to close gap

For Econviewsthe emission tap for the purchase of dollars is one of the “most problematic”. “This measure aims to sterilize the pesos that are issued to acquire foreign currency. The economic team’s correct point is that, with a currency control, exporters do not necessarily increase the demand for pesos when they sell dollars. Hence the need to sterilize. But this should change once the currency controls are lifted because that would be ignoring the demand for pesos.” This is how they explained the complication that the Treasury Palace has.

For this consultancy, The problem was that the market did not like it or, in the words of some members of the economic team, “they do not understand us”. “Lowering the gap was actually the goal and something gave way: from 55% to 43%. But at a cost of Greater country risk and nervousness in the bond market,” they specified from Econviews.

For its part, for FMyA from the economist Fernando Marullthe gap before the announcements was close to 60%, “a level that compromises the economic plan and would hinder a potential unification of the foreign exchange market.”

“The threat of possible intervention by the BCRA helped lower the CCL in the first days of the week, even without the need to sell reserves, and The gap returned to more tolerable levels of 40%. Only on Wednesday were the Central Bank’s operations recorded on the parallel market; The entity supported the offer, without defending a maximum price“, Marull analyzed.

In turn, from the consultant 1816they proposed a scenario where this measure is successful and, in this regard, they said: “It is possible, but there are two problems: 1) the Government must convince the market that will maintain the current course in the short/medium term, Beyond what it ends up doing; 2) the market, which two months ago had prices that were compatible with a “soft landing” of the exchange restrictions without devaluation (gap just above the PAIS Tax and breakeven inflation around 3% monthly at the end of the year)now “he doesn’t see her” (42% gap after intervention announcementimplicit inflation close to 4% monthly)”.

Exchange rate gap: how far would it go?

From IEB GroupIn their weekly report, they explained that, with the Central Bank intervening in the gap, the “carry trade” with instruments in pesos may return, since they project that the Government would go to an exchange rate gap that would fluctuate between 35% and 45%.

At the same time, Jorge Vasconcelosvice president of IERAL of Mediterranean Foundationsaid in his latest analysis: “In the short term, what is worth is the price of the free dollar, since if it exceeds a certain ceiling (?$1,300?) it is presumed that Offer will appear in the CCL on the side of the Central Bank. And if there were a tug-of-war with the market, net reserves would deteriorate at a faster rate.”

For Vasconcelos, Government It only remains to double the bet, now in a double sense: that inflation actually converges to the exchange rate pattern of 2% monthly and that the latest measures achieve a consistent reduction in the exchange rate gap.