For analysts, the fragility of reserves compromises the relative calm of the exchange rate in recent days

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After two weeks of turbulence in April, the foreign exchange market seems to have “normalized” in early May. Although still with some volatility, the blue dollar closed Friday at the same value it reached at the end of last month, $469, and the financial dollars have recovered a still relative stability.

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But the fragility of reserves and the uncertainty about the ability of the Central to recover the dollars lost so far this year, has put a brake on the plays of Sergio Massa, who has appealed to “all resources” to prevent the dollar from continuing to skyrocket amid spiraling prices and ever-growing political tension on the eve of the electoral race.

The central bank it sold $274 million pay importers at the beginning of the month. He also intervened in the bond market, so he separated from greenbacks to buy government bonds. In addition, it has had to deal with payments to the Fund of 800 million dollars in recent days. For this reason, the body has once again seen a sharp drop in the level of gross reserves, which closed just above $34,000 million on Friday.

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This level, the lowest in more than six years, it makes the market put its magnifying glass on the amount of net reserves, which various consultancy firms estimate as negative at at least US$ 1,000 million. “The reserve situation continues to be extremely worrying and none of the fundamental macro ensures that the -relative- stability persists over time,” says the consultancy Invecq in its latest report.

Economist Fernando Marull estimates the Central Bank’s net reserves to be around – 788 million dollarsbut if measured with the Fund’s methodology, net reserves would reach US$1,780 million.

Why is the organization led by Miguel Pesce selling at a rate of 100 million dollars a day? “This can mean several alternatives: He’s using bank reserve requirements, Sedesa pass, he’s borrowing gold as collateral or debt with Yuan as collateral”, said Marull, who stressed that this is “a very worrying dynamic”, and that in the face of PASO the Government could appeal for more shares or a fourth round of the “soy dollar”.

“The exchange rate imbalance is likely to continue in the coming months with a loss of gross reserves between May and July of more than US$2.2 billion if external financing does not increase. This weakness in the reserve position complicates the stability of the exchange rate gap in the preview of PASO”, they underlined in Delphos.

While Massa works “three prongs” to try to get new dollars to help alleviate the situation, the market believes that if the Central Bank fails to curb the demand for dollars, this international contribution will skinny.

All in all, and with an eye to the very short term, the strategy implemented in the last 10 days has served to reduce the exchange rate gap, which stands at around 107%. Economists agree that, with this lack of dollars, it will be difficult to get it to the 70% to 80% level that would be “stability”.

“Containing the exchange rate gap is an essential part of the ‘Massa plan’ and a cross-cutting challenge to the ‘Dollar Front’, ‘Weight Front’ and ‘Price Front’: currently, a parallel dollar jump, the inflation is more easily filterable (we will likely see some impact in the April and May numbers) and raises devaluation expectations, further reducing the net supply of foreign currency,” they said in Ecolatina.

Source: Clarin

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