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The dollar, the main surprise of Javier Milei’s first 100 days

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He economic team reached an exchange rate scenario that was just over three months ago unthinkable: after the jump in devaluation, he put the brake on the official dollar and understood the weight is appreciated againin a context of sharp fall in the parallel exchange rate and the gap.

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THE peace exchange rate that characterized much of the first 100 days of Javier Milei’s government could be further extendedeven if the variables of the real economy, such as inflation and the level of activity, continue to give excellent results adverse outcomes.

Martino Poloeconomist Cohenexplained: “One of the disputes that the government has had with the market concerns the exchange rate policy. At the beginning of its mandate, it surprised with a notable rise in the exchange rate, taking it from $366 to $800and has maintained a constant devaluation of 2% per month since that time.”

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“Despite Inflation offset more than a third of the increase in the real exchange rate – $800 in December is equivalent to $530 today – and this trend is expected to continue in the coming months, the government is confident that, with foreign exchange coming from the agricultural sector and an improved financial climate, will be able to contain expectations of a new devaluation” – added Polo.

One of the main indicators that the market is starting to believe Luis Caputo and Santiago Bausili is the futures segment. Not only do investors no longer see the exchange rate rising in the short term, they actually see it reduce their expectations of an increase in the official exchange rate for the last quarter of the year. So, for example, they are now hedged against a dollar that could reach $1,292 in late November, even if the price of these contracts falls.

In this regard, in Aurum Values explained: “The expectations paid by the market remain consistent with the pace of the official devaluation. Despite the comments of the Minister of Economy on the opening of imports to ‘competition from (some) products’ and, above all, the consistent appreciation of the real value exchange rate, is not reflected in the futures curve other than a slight increase in the futures curve to crawl at a rate that would continue to appreciate the real exchange rate.”

However, they cautioned that this possibility of an increase is not entirely ruled out: “This exchange rate policy allows daily positive results in the MULC, at the cost which, in our opinion, increases the possibility of an exchange rate jump to readjust the its real level “It should be noted that the futures market is operating with low volumes and open interest recovering compared to the end of November.”

In this sense, for the economist Fernando Marull There are several factors that could put the exchange rate gap under pressure again. “Even though the dollar has fallen in the last two months because the macroeconomic situation is getting back on track: with a fiscal surplus, the withdrawal of pesos from the streets and almost 10 billion more dollars in reserves, There are “temporary” factors that cause the dollar to continue to exert downward pressure. These factors could change in the coming months and others may be added,” he warned.

Among these stands out a very low exchange rate gap, which could cause investors consider the parallel dollar “cheap”; new demand from agricultural producers once they liquidate their harvest dollars, and potential disarmament of agricultural producers financial speculation on the interest rate what we have seen in the last two months.

“If he starts to turn around to carry, there are still pesos putting pressure on the dollar. In the case of fixed terms in pesos, there are almost 1,000 million dollars in UVA,” Marull said, although he clarified: “Likewise, for now these factors do not play, but could start to influence from April.”

Source: Clarin

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