Two weeks after the currency rushthe government continues to intervene to contain the dollar. The contingency plan helped calm the market, but questions remain about the future. Is that, despite recent restrictions on buying cash with liquidity (CCL), a significant volume of dollar-denominated bond transactions has been observed in recent weeks.
According to private estimates, the traded flow of AL30 against pesos has averaged from $15 million to $70 million per day over the past month. This would reflect official intervention, mainly by the Central Bank, to keep parallel dollars at bay. Over the past two weeks, the MEP has remained roughly unchanged at around $435 and the CCL at $453.
“What you see is that the AL30 is in beastly volume, which indicates that they continue to outsell those stocks in general, dollar prices are not destroyed, could also buy bonds with dollars, but what is striking is that they are selling a lot against the pesos and the prices are not destroyed”, one operator pointed out.
The Central Bank sells securities against pesos and buys them back using dollars from reserves. The stock of government bonds of the BCRA has increased in the weekly balance, which would mean that the ANSeS has transferred its arsenal to strengthen the firepower of the table under the control of Sergio Massa’s team. “It comes calmer but there is still intervention”, recognized in official dispatches.
After notifying the IMF of the official intervention, Government halted funding for CCL purchase in early May and limited access to brokerage firms to market via screen (PPT). This resulted in the return of the SENEBI dollar, a parallel round in which large investors trade with each other at higher prices ($453) than they intervened ($444).
Sources close to the BCRA estimate that the entity manages an average of $30 million a day, the equivalent of $150 million a week and about $600 million a month. A margin of action that is difficult to sustain over time considering that reserves have decreased again this Thursday and analysts estimate that net reserves are already negative.
“To keep the exchange rate artificially low, the government does 2 things: 1) sells cheap dollars (which it no longer has), 2) sells cheap bonds (what BCRA is doing now with the AL30) which is tantamount to borrowing dollars at crippling rates,” economist Eduardo LevyYeyaty who works with radicals on Together for Change said in a tweet.
In this framework, the questions that have begun to circulate in the market are Until when can a new leap in the dollar be avoided and at what cost?. If the market thinks these are the last bullets, it can “wait” for the central, which allows the parallel to momentarily go down -as it is now-, but there is the risk that it will go up again when it stops intervening.
“The worst thing is that the sale of bonds against pesos does not serve to lower the CCL, which is what they are looking for. The big question is how long they can continue this path which leads nowhere and only postpones the inevitable” , former finance secretary and director of Econviews, Miguel Kiguel, said in response to Yeyati.
In candidate mode, Sergio Massa asked on Wednesday “political order for there to be an economic order” and warned: “We don’t have another quilombo.” The economy minister continues to negotiate funds with the IMF against the clock and seeks relief in Brazil and China to offset the foreign exchange drain. All in an election year with a record drought, declining activity and accelerating inflation.
“The government has a strategy to do everything in its power until the advance or not of the IMF disbursements is defined. It can continue to contain the rise in financial dollars, the question is how much it is willing to tolerate, particularly if there were to eventually be a significant jump in the official dollar,” said Claudio Caprarulo, director of Analytica.
Without a rebound in the soybean dollar or the arrival of foreign aid, there are still tools: the authorities could tighten restrictions on imports or make foreign currency more expensive for tourism. Meanwhile, they will have to cross a foreign exchange desert on their way to PASO. And it’s unclear how many reserves it will take to reach that spot.
“As of yesterday we estimate he used $180 million, but $150 million in the first four days and $30 million in the next seven rounds. So it depends on the agent dollarization rate. And with negative net reserves at -1, $3 billion is hard to figure out a number,” said Emiliano Anselmi, an economist at PPI.
NS
Source: Clarin
