Blue dollar, in a nosedive due to the lack of pesos: the four keys that explain why it has been falling for a month

He blue dollar is trading lower this Friday, August 16, and is offered at $1,345 in the city. This marks its lowest nominal value in almost two months. Also, is on track to record its fifth consecutive weekly loss, the longest streak of losses in the Milei era since which there was a six-week streak of declines between January and February of this year. However, this time, the downward streak has other reasons and the market is analyzing what they are.

And it is that The continued decline at the beginning of the year occurred after climbing strongly to $1,255the price reached on the 24th of the first month of the year, after the devaluation. It was an “overshooting” in reaction to the 118% jump that the Government applied to the official exchange rate, which was then adjusted downwards.

Meanwhile, this time, The blue dollar’s series of falls began after reaching its historical maximum of $1,500 on July 12. The jump was due to the excessive rate cut applied by the Central Bank, which triggered the parallel markets, and, in reaction, the Government began to intervene in the financial market to calm the escalation.

Blue dollar, the keys behind the decline

Key 1: The intervention of the BCRA in the financial sector

When they fall, the financiers, through the intervention of the Central Bank, drag the informal sector down, since, in some way, both types of arbitration changes. That was the beginning of the decline in the blue currency that we have seen in recent weeks. “I think that first of all there is a process of decline in financial dollars and it drags the blue currency down accordingly, avoiding generating bicycles that give instant profitability on a handrail and can erode exchange stability,” he describes in this regard. Scope The economist Federico Glustein.

The economist Lorenzo Sigaut Gravina points out, for its part, that lParallel quotes are falling because the Government has taken several measures to control the gapeven at the cost of losing reserves to control demand in the Contado Con Liquidación (CCL) dollar and the MEP and this is transferred to the blue, which moves similarly to the global trend.

The Executive implemented the following measures to reduce the Country Risk and the gap:

• intervention in the CCL;
• reduction of payment terms for imports in the MULC;
• advance transfer -not yet made- to the Bank of New York of interest (US$ 1.5 billion) from Bonares and Globales and
• reduction of the Country Tax (on Sep-24).

And Sigaut Gravina points out that “that puts us in a somewhat better financial moment“. Thus, as market analyst Elena Alonso states, “the Government’s plan to sell dollars in the financial exchange market is having an effect.” However, there are doubts about the possibility of continuity of this scheme.

Key 2: Lack of pesos

However, it is not the only reason behind this long bearish streak, as the analyst mentions, on the other hand, the dynamics of income and inflationThe famous “there is no money” becomes a reality in the pockets of those who usually go to the informal market to dollarize and puts downward pressure on the price of the blue dollar.

“The pressure from the Christmas bonus and some recovery of purchasing power disappeared towards the end of July and this trend is consolidated in August, allowing demand in the blue segment to fall,” says Glustein in this regard. In this context, many agents are forced to sell dollars to pay off obligations and supply increases, causing it to fall slightly.

The market expert and recognized as “the guru of blues”, Salvador Di Stefano, He also warns that “there is a monumental shortage of pesos” and that is combined with an economy that is in recession.

Key 3: Liquidity needs by maturity

Along similar lines, Gustavo Quintana, from PR Exchange Operatorspoints out that “the seasonal demand that justified last month’s increase has ended” and that is combined with the lack of pesos, which is noticeable in that market.This month also comes with tax deadlines for individuals, and there is also an increase in current expenses and, of course, the winter holiday party has to be paid for,” he says.

Key 4: More supply than demand

In this context, for Alonso, the fact that The stock of dollars can grow from less to more, with the implementation of money laundering, and combined with a slight growth of the monetary base and an interest rate that, little by little, is becoming positive again.has caused many to give up their dollars to do “carry trade”.

Thus, in short, Quintana considers that A big element that is playing out is that “there are more sellers than buyers”And something that contributes to this is that “the monetary base is growing less at the moment, which means that there are fewer pesos in the market,” as Alonso suggests.

What’s next for the blue dollar

“I think that The laundered dollars will have a positive impact on the exchange rate dynamicsas well as the pesos that are poured into the moratorium, since they will remain within the State system and will not go towards the dollar,” Alonso predicts. Thus, going forward, he anticipates that The downward trend of the dollar will continue to exist and he hopes that, beyond any element of the external front that may appear, we will go towards a stage of greater tranquility, although, in the meantime, he believes that there will be a few months with some volatility.

“My impression is that the blue dollar will continue with a downward trend because Many are selling so as not to get rid of other assetssuch as soybeans, which are very depreciated and that is combined with the recessionary scenario,” says Di Stefano. He points out that many companies are financing themselves by selling their dollars to resist the economic situation and believes that this could make the blue reach the $1,250 zone in the coming weeks, a value that he sees as a floor.

An element that is worrying, on the other hand, in this sense, is the inflow of dollars and the health of the reserves.which as Sigaut Gravina warns, “are facing serious difficulties because there is a very low level of liquidation of soybeans due to international prices and a local exchange rate that is unattractive for exporters.” In this context, he warns that, while the Government uses the BCRA dollars in a context in which they are scarce, the big question is whether this is sustainable.