In another tense week for markets, financial dollars set a new high. Cash with liquids, the method that allows you to withdraw foreign currency from the country, closed at $403.5a leap of 0.7% during the day which brings the gap with the official dollar back to the brink of 100%.
During the week, cash with liquids or CCLs increased by 14 pesos and broke through the 400 peso barrier. Its cousin, the MEP dollar that trades on the Buenos Aires stock market, has closed $ 388.8five pesos above the blue dollar, the only price that did not move during the day and which closed the week at $383.
Financial dollars are bought and sold through Argentine bonds and stocks. The recent escalation is the consequence of a forced change of government strategy. In February, the Economy managed to trample the price of the CCL and the MEP by dint of intervening on the market by buying bonds to support the price of securities and thus curb these dollars, which had rebounded in mid-January.
To stop that ascent that made us reach the blue $388the highest nominal price reached so far and which tends to operate in line with the evolution of the MEP and the CCL, Sergio Massa has launched a bond buyback plan.
The stated goal was to restructure debt and reduce country risk, which measures Argentina’s excess cost of borrowing. The official announcement was that $1 billion would be awarded to this goal. But the plan didn’t work: since the mid-January announcement and after using $520 million, country risk rose by 300 points, while bonds added losses of more than 10% over the year.
What worked was the economics team’s unstated goal: to stop the rise in financial dollars, which in the case of the CCL remained around $360 until the end of February, but was halted when the IMF, which from the outset he had opposed the bond buyback strategy, He demanded that the government stop intervening in this market.
Massa agreed to this request, wanting the easing of this quarter’s reserve target change to be formalized once and for all and needing the agency to unblock the $5.3 billion outlay to pay the agency itself and thus avoid default.
This resulted financial dollars are up 10% so far this month, and that blue rose eight pesos in the month.
As inflation rises and the exchange rate strengthens, alternative dollars become a market benchmark and can influence the prices of some products. Now the government tries to decompress the pressure on these dollars with the raise the central bank rate, which yesterday raised the key rate from 75 to 78%, so that the fixed conditions, which now yield 6.4% per month, do not lag behind inflation. This would allow them to remain attractive to savers and temporarily reduce the temptation of dollarization.
“The ruling party has been left without its preferred strategy to contain the CCL of late, e once again he resorted to a rate hike to make the carry trade attractive again with medium-term instruments and, thus, ease foreign exchange pressures,” the PPI indicated, although they cautioned that the rate hike could have been less amid the onslaught of inflation.
In this way, the rate increase has not finished calming the market’s anxiety and this Friday led to the Central having to sell US$139 million and to allocate US$871 million in the month.
There has been a leap in financial dollars along with the fall in Argentine stocks and bonds. The most notable decline was that of the AL35, which lost 2.35% on the day. So far this month the bond slump has already reached 13.5% and in this way they reverse the good start they showed in January.
Bad day for equities too, here and in New York. In the US, the Dow Jones, Wall Street’s main index, fell 1.2%. As it happened, a bad day on Wall Street hits emerging markets and drags all Argentine assets lower.
The coup felt at country riskwhich in the latest round this week advanced 2.5%, to 2,383 basis points.
Merval fell 0.7% and lost 10% on the month in pesos and 18% on the year. In New York, all Argentine stocks plummeted. The worst share was taken by Despegar with 8%, followed by Supervielle with 7.1%, Macro with -5.8% and BBVA with -5.4%.
The combination of the crisis triggered in the United States by the collapse of Silicon Valley Bank and the collapse of Credit Suisse in Europe ended up drawing the perfect storm for Argentine stocks. Throughout the month, BBVA, Galicia, Edenor, Telecom, YPF, Transportadora Gas del Sur and Banco Supervielle recorded declines of more than 20%.
Source: Clarin
