The Government celebrated the triumph of donald trump in the United States presidential elections and the market did the same, with a strong rise in Argentine assets and a new compression of the exchange gap. However, not everything seems to be rosy. From New York City they sent warning signals regarding the impact that the Republican’s policy could have on the stability of the exchange rate that proposes to extend the management of Javier Milei.
The most explicit message was transmitted Robin Brooksa well-known financial advisor Wall Street. To the current Senior Fellow of the Brookings Institute and former Chief Economist of the Institute of International Finance (IIF), A period of pressure is coming on the dollar in Argentinajust when the real exchange rate registers an appreciation not seen in many years.
The trigger, according to their analysis, would be the completion of Trump’s proposal to raise tariffs to the import of Chinese and other countries’ products to protect American industry. In this framework, a cycle of strengthening of the dollar in the world would imply the outflow of flows from emerging markets.
“Argentines have not realized it yet, but Trump’s victory (if it involves US tariffs on China and other countries) will exert great devaluation pressure on the peso“, he warned through a publication on his social network account X.
Books assured that an event of these characteristics not reflected in current prices of the Argentine financial market. “The gap between the parallel exchange rate and the official exchange rate is narrow,” he added. The advisor’s warnings about Milei’s exchange rate policy have already earned him criticism from local officials, such as those from Minister Luis Caputo himself.
Donald Trump’s triumph and volatility of emerging currencies
Brooks’ warning continues a message he had published days ago, in the run-up to the elections in the United States. There, he had stated that “it is possible that we are just a few weeks away from a large wave of devaluation in emerging markets” in case the Republican candidate wins, precisely because of his idea of raising tariffs.
In that sense, the market’s first reaction was a strengthening of the US currency: the dollar indexwhich compares it against other strong currencies on a global scale, jumped 1.6% and exceeded 105 points.
For Latin American currencies it was an extremely volatile wheel. They opened this Wednesday with strong falls, which were reversed as the day progressed. The real, for example, traded 2% but then turned around. The same thing happened with the Mexican peso, the sol, the guaraní and the Chilean peso, among others.
Dollar: what happened in Argentina?
This did not happen in Argentina. The official exchange rate continues to be governed by the stocks and by Luis Caputo’s “tablita” (which determines a monthly increase of 2%). And financial dollars operated lower, amid the city’s euphoria for Argentine assets: the MEP dollar fell 0.7% to $1,145.69 and the CCL fell 1.2% to $1,167.22.
The Government is excited that the ideological affinity between Javier Milei and Trump (beyond the differences in trade policy) will help unblock the negotiation with the International Monetary Fund.
Anyway, Luis Caputo You must monitor the evolution of the dollar in the world and emerging currencies. An outflow of capital from these markets could add pressure to its exchange strategy, currently supported by a scheme that stimulates the “carry trade.” via exchange rate appreciation and interest rates in pesos that leave juicy returns in dollars as a way to stimulate the flow of foreign currency.
This helped the BCRA to buy currencies again. But the continuity of the scheme depends on extending the exchange rate appreciation (today the dollar is already cheaper than the average in November 2023, before the December megadevaluation) and on the market trusting that it will be able to sustain it. For now, alerts began to arrive from Wall Street.
Source: Ambito
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