The three factors that led to a decline in the dollar after its maximum peak of the year

The three factors that led to a decline in the dollar after its maximum peak of the year

He dollar fell 2.22% in ten days, after having reached its peak of 42,254 pesos last Wednesday, September 25, which led it to reach its current value (41,316 pesos), a minimum in 18 days, according to the interbank price of the Central Bank of Uruguay (BCU).

Behind this bearish behavior, after a significant escalation in the previous months, a series of factors appear, some of them international and particularly one at the local level: the possible approval of the plebiscite about social security that promotes PIT-CNT.

The PIT-CNT plebiscite

Investor concern over surveys suggesting possible approval of the PIT-CNT plebiscite led foreign investors to sell nominal sovereign bonds in pesos for around $700 million, which led to a buyback by the AFAP which underpinned a sharp rise in dollar in September.

However, after these movements, the greenback seems to calm down in line with some polls that show that victory at the polls for the Yes ballot will be difficult, as suggested by the decline of almost a peso in its value in recent days. .

The doubts will be cleared up in almost three weeks, when the elections 2024 and the future of the plebiscite is defined.

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The regional weakness of the dollar

In parallel, the US currency remained between neutral and downward in the region. For example, the real, one of the reference currencies for the Uruguayan peso, It closed on Friday lower and is going through a period of oscillations, with a final week with a slight increase after four consecutive downwards.

In Argentina, he blue dollar It fell 3.24% in the week and pierced 1,200 Argentine pesos, after a sustained decline in recent days.

However, at a global level, the dollar index operated in the opposite direction, with a week in which it appreciated 2.13%, after four falls in a row and the shock that the stimulus plan for the economy of China.

Expectations about the Fed’s decision

One aspect that investors follow closely is the warning of the United States Federal Reserve (Fed) about the beginning of a cycle of monetary relaxation, which began last month with a 50-point reduction in interest rates.

It followed that the consumer price index (CPI) fell four tenths in August to 2.5% year-on-year, while the price index of personal consumption expenses (PCE), the measure preferred by the Fed to monitor the evolution of prices, fell three tenths to 2.2%.

For his part, the GDP grew 0.7% in the second quarter, three tenths more than in the first, the latest economic data from the United States, while employers added 254,000 jobs last month, much higher than expected, and the unemployment rate fell to 4.1%.

With all this data, the market is betting that the Fed will follow last month’s half-point interest rate reduction with smaller moves, discounting quarter-point reductions instead, which boosted the global dollar. upwards during the last week and, if the trend continues, it could continue to depreciate the Uruguayan peso.

Source: Ambito

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