Parallel dollars started the week with increases and this Tuesday they maintain the upward trend. The curve has already been rising since the end of the month after months of plateauing. Among the main reasons is the low liquidation of the field and the drop in rates.
In detail, the MEP dollar rose 1.50% around midday this Tuesday to $1,289, the Cash with Settlement, 1.60% to settle at $1,317 and the blue marked a rise of 2.43% reaching $1,265.
Regarding the reasons for these increases, the consulting firm 1816 stated in its report: “The financial exchange rate exceeded the highs of May 22 and, although the pace of the increase does not reach that of the worst days of the fourth week of May , it cannot be overlooked that the peso accumulated two days in a row of sharp falls (which had its correlation in asset prices) and that it once again undid more than a month of carry in just one day. The low spot volume suggests that the liquidation of exports (and therefore the supply of CCL via blend) fell yesterday, which could explain at least in part the weakness of the currency.”
Regarding the latter, the Chamber of the Oil Industry of the Argentine Republic (CIARA) and the Center of Cereal Exporters (CEC) reported that companies in the sector settled USD 2,612 million in May, which represents an increase of 37% in relation to to April but also a drop of 37% compared to May of last year, in the middle of the drought.
“The foreign exchange income for the month of May is the result of the export dollar regime in force since December 2023, international prices, the impact of the weather on the corn and soybean harvest rate and the relationship between input costs and grains,” indicated the statement from the entities that together represent 48% of Argentine exports.
For his part, the economist Gustavo Ber He assured that “the rearrangement of financial and free dollars would be caused by recent political tensions, the delay in parliamentary treatment – and doubts about possible additional political concessions – in the Base Law and the fiscal package, a more cautious external context and the lower liquidations that condition the pace of BCRA purchases. This is just at a time when there is speculation that the cancellation of the Chinese swap could be added to the next bond payments.”
“With a gap already in the order of 45%, I think it would be important for it to quickly stabilize in order to avoid a deterioration in the expectations of economic agents and the activation of distortions that are usually generated from a larger gap. , as well as a possible partial transfer to prices, although cushioned in the current context due to the recession,” he added.
While, Pablo Repetto, economist at Aurum Valores, stated that the increase is a reflection of an unattractive level of interest rates. “The rates in pesos fell so much compared to the rate of devaluation of the official that there is no incentive to liquidate foreign currency to the official, which is why the offer for the blend is reduced. There are also many exporters who, with this level of rates and such a backward exchange rate, prefer to go into debt in pesos and not sell foreign currency in advance as happened in the first quarter,” he considered.
Rates in pesos fell so much compared to the rate of devaluation of the official that there is no incentive to liquidate foreign currency to the official, which is why the offer for the blend is reduced. There are also many exporters who, with this level of rates and such a backward exchange rate, prefer to borrow in pesos (Aurum)
It is worth remembering that the Central Bank lowered rates again by 10 percentage points in mid-May, taking it from 50 to 40% nominal annual rate. It was the sixth cut since December.
In the same line, Juan Truffa, economist at Outlier attributed the increase in prices to the fact that the volume that has been operating in the exchange market from exporters is quite meager, with the exception of agriculture, and to the drop in rates that occurred some time ago. almost two weeks and generated relocation of portfolios. Then, we can mention the Bases Law, which although the opinion came out, is still missing for it to have a favorable vote in the Senate. To what extent they can go, we do not know but we do not believe that it has the fuel to be anything violent.”
Going forward, regarding how much the dollar can go, Ber pointed out: “It will depend on the evolution of internal and external events, there is greater global caution and towards emerging markets. If the deterioration deepens on either of the two fronts, in the short term it could test levels of around $1,400which would represent a gap greater than 50%, which would already be too high a level.”
For its part, Repetto projected that at the end of June the CCL could reach $1,350 and the MEP $1,320. “They are possible prices without being anything extraordinary,” he said.
