Contrary to what the market expected, the Central Bank maintains the pattern of a creeping 2% monthly rate in February, after the exchange rate jump in December. The inflationary flare-up of the last three months has begun to manifest itself erode the “benefits” of the devaluation and in the City they warn that the real exchange rate has already returned to the levels it had before PASO in 2019.
After PASO, Mauricio Macri’s government had to validate an exchange rate rise and subsequently reinstate stocks, so the comparison with that moment warns of the risk that the Bausili-Caputo tandem will soon have to follow the same steps.
At the time, financial variables seemed more controlled: inflation was 2% per monththe Central Bank had a high stock of net reserves, the country risk is close to 800 points and raw material prices were favorable. But the change of political direction forced the exchange rate to jump to avoid the loss of competitiveness of the peso.
“It seems to us at least reckless to continue to maintain the strategy of a very low crawl which will create an increasing risk of new imbalances. Visibly, the impact of the August 2019 devaluation on both retail and wholesale inflation is not comparable to the sudden impact of the price adjustment after the Caputo devaluation in December”, they warned Aurum Values.
In his latest public statements, Economy Minister Luis Caputo insisted that, in real terms, the exchange rate stay high, therefore it will not be necessary to rush a new devaluation. The decline in financial dollars gives the government the possibility of continuing on this path which would lead to the unification of exchange rates in the second part of the year.
To consultancy Instead They point out: “The IMF itself is the one who says it is against this argument. In the latest review they assumed that the real exchange rate left by the previous government was between 35% and 40% according to fundamental macroeconomic standards, i.e. a exchange rate which today would be between $870 and $900, showing that the official exchange rate “I would have already fallen behind.”
Although expectations for a second-quarter exchange rate rise have been tempered on the futures market, investors see an official dollar at $1,024 next May, which would imply a 21% jump from $840. it is closed on Tuesday this year.
“Advancing dollar rates embedded in futures are an indication that the slow pace of 2% monthly would have its days numbered. The erosion of competitiveness, even if the situation now tolerates a lower real exchange rate, exists, ” explained Nery Persichini, from GMA Capital. “Assuming REM inflation and exchange rate growth of 2% monthly, the wholesale price of $839 would fall, at today’s prices, to $500 by July,” he added.
Meanwhile, the unusual strength of the peso favored investors who bet on the carry trade. Despite deeply negative inflation rates, investors have made hard currency profits by betting on the peso.
“Thanks to this remarkable short-term appreciation, peso investments celebrated the best start to a presidential administration so far in the 21st century. Since December 10, the carry trade with BADLAR has accumulated 12% in dollar terms, a figure that triples that of the beginning of the Cambiemos administration for this period of the year, highlighted Persichini.
Source: Clarin
