Home Business The reasons that drove the dollar and why the market does not believe that the government can stop it

The reasons that drove the dollar and why the market does not believe that the government can stop it

The reasons that drove the dollar and why the market does not believe that the government can stop it

The acceleration of the parallel dollar rise has once again plunged the government, and of course the Argentines, into a virtual nervous breakdown. It is known what happens to politics, the economy and pockets when this reference price starts to move. Something that had supposedly functioned as an anchor is lifted and the shaking begins.

To make matters worse, the gearbox race adds more or less known ingredients: 1. A weak government with low credibility, 2. the start of an electoral campaign. 3. Serious, but known: a process of inflationary acceleration. And 4. a factor that is beginning to gain weight in public discourse: the -for now, incipient?- prospect of a profound change in the monetary regime, i.e. the possibility that Argentina adopts a “dollarization”.

Add the devaluation itemsinvolving former Casa Rosada chief advisers Antonio Aracre and, on Friday, a brokerage house (see page 21).

None of the factors mentioned already helps to calm the waters.

And the week’s balance sheet reflects these concerns. The dollars are up about 10% in five days. The gaps reopened above 100% again. The official dollar climbs 23% so far in 2023. The parallels climb 33% in the case of the dollar and cash with liquid exchanges, and the blue has lagged slightly: it climbs 28%.

What can happen from now on is uncertain. The economy expects grain companies to put significantly more dollars into the market. Minister Sergio Massa reiterates his confidence in the achievement cool wallpapers international organizations or even the IMF itself. This is an annoying problem. The negotiations are known, but it is also said that in exchange for new funds, potential lenders would reasonably expect the Central Bank stop selling dollars at 218 pesos, Such is the wholesale dollar price on Friday.

Since it is impossible to predict what will happen from now on, clarion He consulted with financial analysts on what he believes triggered the price of parallel dollars this week. This they said:

Esteban Rugna, CEO of Liebre Capital. “There were several points. Since the rumors about the resignations of Massa and Aracre, the latter confirmed, the plan to devalue him … Before the rumor everyone is trying to take the currency hedge. The data on inflation for March, released on Friday the 14th, is also very bad. The feeling is that the Government run the problem behind. The policy rate hike announced on Thursday clearly didn’t help. The rate loses its effectiveness in containing inflation and the transition from pesos to dollars. But it is true that economic activity is having little resistance to this high pace. There is a shortage of foreign currency due to the drought. Nor is it a good sign that in the midst of the harvest the government should come out with the soybean dollar. Furthermore, the decision to limit some imports is another clear sign that the dollars are out.

Norberto Sosa (economist and financial analyst). “It does not seem feasible to try to support the exchange rate without write-downs in a context of very low net reserves. High inflation added to this increased demand for dollars. Moreover, there are technical reasons. The cash-count dollar had lagged behind. We saw this with the 1 and 2 soy dollars. After the liquidation, the pesos moved to money market funds and then ended up pressuring the MEP and CCL alternative dollars, also because with so many access restrictions at the official market market each More and more sectors and companies are getting tired of waiting for the OK from the AFIP and the Central Bank and are turning to alternative dollars be able to continue working. This not only puts pressure on the MEP and the CCL, but also on inflation, because there are always more prices in the economy linked to the MEP and the CCL than to the official one.”

Augustus Darget (Silver cloud). “There’s not much mystery. Last year inflation was 95 and the dollar was up 65%. This year they all rise evenly”.

Martin Polo (Cohen). “For me, what drove the dollars was the March inflation data, a much higher number than expected. There is a general acceleration in price increases and this was also reflected in the early April data. The floor is now higher. Added to this are two other factors: the very weak performance of the Agro dollar, with liquidations well below expectations, and also a new downward revision of the harvest. The combination of high inflation, low currency arrangements and poor harvests has been lethal.

Fernando Marull (FM and associates). The inflation data was a slap in the face. Added to this is that the government has remained silent and this has given rise to all kinds of rumours. The government has taken no steps to stop bullfighting or prices. The BCRA rate hike fell short. Added to this is that soy dollar settlement was paralyzed on Wednesday. Lots of negligence. The government took two very “soft” measures to curb the dollar: it sold FGS bonds at the cost of lowering parities, and raised the interest rate by only 300 points. It won’t be successful.

Another operator of a leading company, who preferred name retention, summed it up as follows: You cannot try to sustain the exchange rate without devaluing in a context of very low net reserves. The inflation data ended up ringing the alarm bells. And the first option in those cases is to buy dollars to cover yourself.

The concrete thing, what emerges from these analyses, is that for the market a stronger devaluation of the official exchange rate seems closer today than it was a few weeks ago.

Source: Clarin


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