Alternative dollars accelerated in January and jeopardize the official strategy to curb inflation

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Despite the battery of measures put in place, the dollar seems to have entered a new phase. After the relative calm of the previous two months, parallel dollars picked up the pace with hikes in January higher-than-expected inflation a situation that could complicate the settlement of currencies and increase pressure on prices.

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So far this year, the MEP and CCL dollars are up 7.4 and 7.5% and blue over 11%, while analysts expect inflation in about 6% in January. Alternative prices accelerated amid tight dollar supply after the end of the $2 soybean, higher demand for tourism dollars and a drought in the countryside. The central bank holds the official dollar in check. The wholesaler is up 4.6% so far this month. It is half an “anchor”, because the dollar weighs more and more in the formation of prices, counted with the liquidation.

“Let’s not forget that the change for card spending abroad is $384. Add to this the fact that foreign tourists today can choose to spend on a card and have a finance dollar withdrawn. supply for blue at a time when demand has increased,” said Pedro Martínez, economist at PxQ.

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On the other hand, since the crisis of June 2022, the parallel exchange rate has lagged behind inflation and appreciated in real terms, falling below the average of recent years. This delay contributed to the intensification of exchange rate pressures at the end of December and motivated the reaction of the Ministry of the Economy.

To avoid a sudden devaluation, the government swap with China activated in January, brought forward in the debt repurchase, raised the repurchase agreement rate and agreed on financing from Brazil for imports. Even so, the parallel price increase did not stop and this Thursday they closed higher: blue, at $385; the MEP, at $352, and the CCL reached a record $369.

“The escalation started at the end of December, then ANSES began to intervene on the financial markets and this triggered the intervention of the BCRA/Treasury with the “debt buyback”. Expanding the monetary question with a curb on activity, a drought and an election year are a perfect combination for rising exchange rates,” said Andrés Reschini, analyst at F2 Financial Solutions.

Reschini also noted a change after last Wednesday, when the central bank began buying dollar bonds on orders from the Ministry of Economy to contain financial dollars. While the monthly growth rate of blue slows down (from 15 to 8%), the CCL and the MEP accelerate even more (from 4 to 19% and from 6 to 18%).

The wholesale exchange rate rose by an average of only 5.15% in January, below December’s 5.9% level. Therefore, if inflation stops above that level, it will be the first time in four months that the CPI exceeds the official dollar, deepening the exchange rate appreciation.

The increase in parallels was reflected in the exchange rate differential, which went from 93% at the end of 2022 to 100% in January. This poses a problem for the supply of foreign exchange, as the larger the gap, the less incentive there is for exporters to settle foreign exchange at the official rate and the greater the demand for dollars to import or pay off trade debt, a to which is added the climate and electoral factors. .

“There is an exchange problem because of the drought which will generate less exports and because the soybean 2 dollar has anticipated the agreements. Secondly, towards the end of the year the producer will be waiting for the goods waiting for the president-elect, who can unify the foreign exchange market – in other words, raise the official dollar – or lower the withholding taxes, so it is another incentive to export of less or accumulate more.” , explained Lorenzo Sigaut Gravina, founding partner of Equilibra.

In this context, the Central Bank made sales of 45 million dollars this Thursday, the January balance has changed sign, so it is already negative by 48 million dollars, according to Gustavo Quintana. And gross reserves closed at $42.272 million, down $385 million in just four days since Monday.

All of this has added pressure to the government’s pegging scheme. The government entered into a comprehensive set of price agreements in November and began promoting parity at 60% per annum at the end of the year. But the alternative dollar’s rise above inflation rules out the possibility of hitting a 4% CPI in April.

Ecolatina estimated GBA inflation at 6.5% in the second fortnight and 6% for the month.

“We expect inflation to accelerate in January versus December and above the fourth quarter 2022 high floor of 5.4%. This will add to the possible impact of drought on food prices, a potential revival in meat prices, wage adjustments, public tariffs and import restrictions,” said Santiago Manoukian, an economist at Ecolatina.

Source: Clarin

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