At the beginning of the working week, after the XXL Carnival weekend, The parallel dollar surprised with a sharp drop in all its prices. On the streets, the blue dollar fell nearly 3.5% to return to $1,105. In the financial market, both the MEP dollar and the cash dollar, the way businesses use to become dollars, hit their lowest levels in more than a month.
The CCL closed down 4.4% to just above $1,175. Meanwhile, the dollar stock market lost another 4.2% to close at $1,124.14. On the official market, the Central Bank made the largest purchase of dollars in the last thirty days and retained 255 million dollars for its interventions.
The movement confirms a trend seen in the last three wheels, but attracts attention for its strength. Clarín consulted several city experts who identified the reasons for this decline in political and economic factors.
Setback for the Omnibus law and the agreements with the PROs
The news that shook the markets last week was the disappearance of the Omnibus law from parliamentary discussion. Javier Milei’s political weakness in reaching the agreements necessary to obtain legislative approval of the measures with which he intends to deregulate and stabilize the economy has influenced the prices of bonds and shares.
Against this backdrop, the peso has shown unexpected strength: so far this month, both the MEP dollar and the CCL have accumulated declines of 4.5% and 4.3%, respectively.
At GMA Capital they stated: “The financial exchange market ignored the legislative earthquake. Without attributing a significant probability to a political crisis scenario, investors paid more attention to the fundamentals that Caputo took it upon himself to underline: the fiscal commitment , the recomposition of reserves, the reduction of the monetary imbalance, the expectations of a slowdown in the CPI and the restrictive effect on demand resulting from the recession”.
Now, the news of a possible government deal with the PRO could, in the opinion of one market participant, be one of the reasons for the dollar’s collapse.
Opening of the MULC to small and medium-sized enterprises
From Wednesday, 10,000 importing SMEs will be able to return to the official foreign exchange market to purchase dollars and pay off debts generated during the previous administration. This movement implies greater demand for pesos, which will then be exchanged for dollars at the official exchange rate, so many companies may turn to selling their dollar holdings on the financial market.
Inflation is not increasing (that much) and demand for pesos is sustained
Ahead of January’s inflation data, many investors welcomed the idea that prices did not continue to skyrocket after the December measurement. Finally, the CPI for the first month of the year showed a price increase of 20% monthly.
“The government announced that the monthly rate would be around 20%, which would imply a slowdown from the monthly rate of 25.5% set in December,” they explained to Cohen this morning. “Although the stability of the official exchange rate and the parallels, added to the sharp decline that would mark the level of activity, would ease the pressure on the prices of goods, the pressure would come from the services side – although the rates have not changed yet adjusted” .
Nonetheless, annualized inflation stands at 254%. In this context of still high inflation, many investors have sought to turn to index-linked bonds, which eases pressure on the exchange rate gap.
Bopreal cause
On Wednesday and Thursday the Central Bank announces the second series of the Bopreal, the bonus for importers. Unlike the first, this series is attractive to small businesses in the sector and also to retail investors, so surplus pesos could migrate to this bond instead of the foreign exchange market. In the first placement of the month, Central awarded 270 million dollars, so 1,730 million dollars remain to be placed in these new tenders.
Source: Clarin
