Although the blue dollar rose by 20 pesos this Friday, the summer of exchange rates continues: Financial dollars have lost 11% this month and the exchange rate gap has narrowed to 32%.
Cash with liquid closed the week $1,112, the MEP $1,064 and the blue inside $1095. All prices are moving away from the peaks reached in mid-January, when the financial dollar crossed the line $1,300.
A similar path follows country risk, the indicator that measures the excess cost of Argentine debt, which ended in 1788 basis points, the lowest level in 20 months. This drop is a consequence of the rebound in Argentine stocks. This Friday the AL 30 in dollars closed at US$45, an improvement of 13.9% over the month and 19.2% over the year.
These numbers show that, despite the political upheaval that Javier Milei’s government went through after the failure of the omnibus bill in Congress, The market continues to trust the direction of the program.
From GMA Capital they underline that, despite the legislative setback due to the Bases Law, “there is a vote of confidence from investors.” They point out that the cash price with liquidity is the lowest in real terms in the last 4 years and while the GD30 bond has reached its highest valuation since the restructuring.
And they point out that, due to the acceleration of inflation, the $1,100 Current values of the CCL are equivalent to the value of the dollar in April 2020. “In this sense, the (financial) peso has the highest level of relative strength since the start of the pandemic. Meanwhile, The exchange rate gap between the CCL and the official one has collapsed to 32%, while the spread against the importing dollar reached 12%.”
“However, we understand that this market support is a necessary condition to avoid new nominal turbulence and oil the engine to stabilize it, but never enough“warns GMA.
Market confidence in the official plan appears to be based on the fact that the government managed to avoid a price spiral process with some success. The slowdown in inflation, which went from 25.5% in February to 20.6% in January, the recovery of reserves by the Central Bank, which with the purchase of 275 million dollars this Friday it’s already accumulating 7,561 million dollars since December and the absorption of pesos by the monetary authority have led the market to adopt this mantra “I choose to believe”.
GMA Capital adds that, in addition, “the decline in activity (January “early” indicators indicate declines between 20% and 30% in key industrial and construction sectors) and the decline in real wages collaborated to mitigate the go through from devaluation to prices”.
“Anyway, we opt for prudence“, they underline and highlight that the government has adopted blender and chainsaw solutions for the urgent solutions, while what is important, the fundamental reforms, are bogged down. “For now the market is satisfied with the solution for the urgent, but does not know that the stabilization party has just begun.
For Portfolio Personal Inversions (PPI) “liquidity is at its lowest level in real terms since April 2020. As a result, the CCL is much closer to its average level of the last 10 years than to its historical record of $1,992 reached in view of the 2023 general elections. In this sense, to return to the average of the last decade of 994 dollars, the financial dollar would have to fall by a further 15.2% in real terms, while to return to the critical level it would have to increase by 74% in real terms, which seems unlikely in this context.
From the PPI they point out that at the price of mid-January “the CCL seemed “expensive” considering the perspective of the economic order, so some investors could have seen Attractive entry points for trade transportationasking for more pesos in a month in which, atypically, the demand for money suffers the largest monthly decline of the year.”
Source: Clarin
