The rise in pesos rates has been an effective tool for absorbing the demand for outstanding bills and lowering the pressure on alternative dollars. But analysts warn that it is a precarious balance which could fail if Central Bank reserves continue to decline.

Hand in hand with rates that offer returns in excess of 6% per month, the financial speculation on the interest ratethe strategy by which investors seek to exploit the stability of the dollar to make profits in pesos without losing purchasing power in hard currency.

With the rate hike, that’s already in 75% per annum, the economic team tried to reduce pressure on the dollar and prices. In the first case, he succeeded, as savers stopped going through the caves of the center and turned to home banking to establish fixed conditions.

Therefore, while the blue dollar has remained around $ 290 for three months, Anyone who puts $ 100,000 in the bank today will receive $ 106,500 next month.

According to data from the Central Bank itself, “the monthly expansion of fixed terms in real terms would have been more than 5%”.

“In a period of relative exchange rate stability, a monthly rate in pesos with virtually no exchange rate movements results in a dollar rate“, explains Juan Pablo Albornoz, economist of Invecq.

As long as the wheel keeps turning, the investor keeps earning. But the move isn’t without its risks. “Nobody knows how long this exchange rate stability will last”Albornoz points out.

Along with the rate hike, the financial speculation on the interest rate Also driving is the leap that the free dollars had at the end of July, when the blue dollar touched $ 350 in the middle of Silvina Batakis’ interregnum at the Ministry of Economy. Added to this were “the lower issuance needs to support the pesos bond curve after the debt crisis and the fiscal adjustment that the Treasury is carrying out,” says Albornoz.

“The initial appreciation of the financial exchange after the stress of July gave a first impetus to the strategies of financial speculation on the interest rate. But the subsequent “exchange pax” strongly enhanced the positions in pesos at the rate or with the CER adjustment, which advanced at an annualized rate of 100% in local currency. So since the end of July, the dollar yields of these maneuvers already exceed 33% direct in dollars“, says Nery Persichini, Head of Research & Strategy at GMA Capital.

How long does the exchange rate last?

“It is difficult to establish an expiration date to carrybut what seems true is that the imbalances affecting the economy today are greater than a few months ago “, argues Persichini.

For the analyst, the weakness of the exchange rate is linked to the fact that “the macro is heavily exposed to any shock that could reduce the dollar amount (drought, decline in raw materials and leaner harvest) and / or expansion of the quantity of pesos (lower than expected rollover, accumulation of remunerated liabilities of the BCRA, slow adjustment of the fiscal deficit). Any variant would hit the gap exactly. This context coexists with the proximity of the elections, the high season of dollarization of the portfolio“.

The high rate strategy has a direct impact on tax accounts, as both the Central Bank and the Treasury have to offer higher yields, yields and rates to place debt. “The fundamental problem is that as long as there are positive real rates, the idea that debt will be liquefied by inflation will not materialize,” says Pablo Repetto, director of Aurum Valores. and this generates “a dynamic of debt growth that can become destabilizing”.

In this context, “there is a risk of saturation of the pesos debt market that potentially could lead to greater demand for dollarization“, adds Repetto.” All the more so when an election year awaits us with a terrible drought affecting the main exchange rate generator “.

On the positive side, “high rates can generate some reduction in inflationary pressure, although in the current environment the feeling of an unstable equilibrium does not allow it to function well enough,” Repetto says.

For Persichini, the fact that the nominal interest rate is at a level very close to inflation “contributes more to the stability of the exchange rate than to the rise in the consumer price index (CPI), which is now heavily influenced by inertia, acceleration peg for crawling (the devaluation rate) and the correction of tariffs “.

AQ