Saturday , October 1 2022

Dollar: what is worrying is not the ticket, but the increase in country risk – 11/27/2018


Seven weeks of foreign exchange and dollar blocked to "floor" of the flotation band, but one day the bill amounts to a peso and all the yellow lights of the Argentine economy continue.

Some of them happened on Monday, when the retailer kept the dollar by 40 dollars, and the wholesaler closed at $ 39.05, reaching the highest values ​​of the year, which was enough to wake up the sensitivity of the forex market.

The race lasted a little, and the retailer, which is the most relevant dollar in volume and operated by professionals, ended with a 1.3% decline to $ 38.55. Is the episode complete?

No one knows but the Minister of Economy, Nicolás Dujovne He continued his attempt to generate calm by saying:"We are very calm with the dollar, it moves very easily."

Dujovne's silence, in fact, is based on the fact that the Central Bank, Guido Sandleris, advanced, who is willing to eliminate all the necessary market weights to ensure a calm exchange.

It is also added to the Minister's silence the advance of the International Monetary Fund that will pay a the new part a loan ($ 7.6 billion) relying on the agency's mission in Buenos Aires has approved the achievement of the objectives of the Government in terms of reducing the primary fiscal deficit and the monetary contraction of the Central Bank.

Central reserves increased by USD 4,952 million, to $ 53,955 million in October, a month in which the purchase of tickets was felt by private individuals (they bought $ 900 million), but without transforming the process dolarizador.

Flight of dollars so far this year it reaches $ 25,959 million, a record that largely explains the exchange rate and the dollar jump between April and September, leading to the recession in recent months.

But the calm came along with the commitment that the money would not grow and the high rates the Central Bank would pay banks to give them letters of liquidity (Leliq).

Leliq has begun to pay 74% a year and has fallen to 61.24% today in what is presented, according to the dollar resumption Monday, as a "floor" to be considered.

The Central Bank has already announced its intention to accelerate the fall in January rates from the 60% per annum target set by the end of the year. What will be the low path? No one knows, and everything indicates that Sandleris will act "trial and error" try to fit fine, very well when it comes to lowering rates.

The government believes that with the IMF payments and the dollar wheat and corn, which will begin to enter in January, has tools to maintain the trading market. But the dollar's problems do not end there.

In recent days, the country's risk rate is far from falling, increased from 600 to 700 points, making it clear that foreign markets continue to have a high level of mistrust over the Argentine economic future.

They doubt that Argentina can pay off its debt after 2020 and that it is clear that strong support from the IMF (US $ 57.1 billion) makes the agency privileged creditor.

This adds to the political doubts summarized in one question: What if Cristina Kirchner beats Mauricio Macri in the October elections?

Kirchnerism is clear about the fear it generates in foreign markets, and it is no coincidence that, in a report published in online politics, the former minister Axel Kicillof I spoke "defend the profitability of companies" and this "Today a renegotiation with the IMF could be made out of a strong position".

Kicillof, turning point in the change of Kirchner's skin, advanced also on PJ's amplitude when he said: "I suppose all those who say Peronist is peronist" adding the old justicial slogan that served both Perón and José López Rega, as well as Menem and Maria Julia Alsogaray about "The Movement is Broad".

Sources of uncertainty are multiplied by politics, and the economy pays boldly: Argentina's long-term bonds (2046 and 100-year bonds) offers annual rents of 10%, but they do not seduce international investors.

The financial photo shows a short-term dollar controlled at the gates of an electoral year that generates expectations about the political outcome and its consequences in terms of capital movement.

In the middle of the game a possible low inflation and improving economic activity in the first quarter of next year.

Meanwhile, and in the short term, the government hopes that the international support it would receive at the G20 summit of world leaders this weekend will give it a little fresh air after a few days of indignation and general shame for the acts of violence that surround us all Argentines.

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