Javier Milei announced this Tuesday that it will make a relevant movement in the exchange administration. He did it after learning that the inflation October slowed to 2.7% compared to 3.5% the previous month. The President said, via social networks, that the monthly devaluation rate will decrease in case the consumer price index (CPI) maintains this trend for two more months. This Wednesday, the market reacted quickly: The quotes of future dollar contracts plummeted up to 2.4%.
In this way, investors’ currency hedging positions accommodated Milei’s announcement. Specifically, the president anticipated that a change in the “tablita” of the Central Bank (BCRA).
The new “tablita” for the dollar
Currently, the entity that presides Santiago Bausili determines an increase in the official exchange rate of 2% monthly. It is the rhythm that has remained constant since last December, when the Government implemented a megadevaluation a few days after assuming its mandate. The President reported that, if inflation maintains the current trend, the wholesale dollar will begin to move at 1% monthly.
As he told Scopein the city it was already expected that the “exchange table” would experience a reduction in the rate of devaluation: if the Government wanted to maintain the incentive for “carry trade”a key element of the strategy Luis Caputo To add currency supply through the financial account, it was considered that it would be necessary to lower the “crawling peg” to maintain a favorable differential for the interest rate in pesos that would allow extending the juicy profits in dollars of those who enter to do the “bicycle”. “. Yields in local currency have compressed strongly in recent weeks in line with the slowdown in inflation.
Future dollar: what does the market foresee?
Although the announcement was expected, this Wednesday the screens of Matba-Rofex, the main trading center for dollar futures reflected a collapse in prices. This is a movement that exhibits the progressive alignment of the devaluation expectations implicit in these contracts to the new guideline announced by Milei.
There were falls in all terms, although they were stronger in the longer contracts. For example, the future for November 2024 fell 0.15% to $1,014.50 and the one for December fell 0.4% to $1,041. This is consistent with a perspective of increase in the official exchange rate slightly above 2% during the last two months of the year. The same occurs with the contract for January 2025, which fell 0.8% to $1,070.50.
Instead, Already for the position in February, the market aligned itself with the expectation of an exchange rate “tablet” that pierces 2% monthly. For that month, the contract fell 1.45% to $1,087.50. For March, the decrease was 1.5% to $1,106. In both cases, the quotes fit the idea of a “crawling peg” somewhat above 1.5%, That is, a pace even higher than that announced by Milei, but closer.
Although, with less volume operated, the most important collapses were seen from April onwards: the contract for the fourth month of 2025 fell 1.7%; that of May, 2.2%; June, 1.9%; that of July, 2.4%; that of August, 2.2%; that of September 2.4%; and that of October, 1.9%.
Source: Ambito
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