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Amazing start 2019: how does the dollar's decline decline?



The 2019 start is very similar to 2018. Just over a year ago, the Government has paid for 9,000 million USD € at the lowest dollar level in history. It lasted for a couple of weeks. By the end of January, a change in the rates in the United States began to change and the flow of assets began, which started the emerging markets. There is an idea of ​​the current situation: megadevaluation, IMF rescue and the highest inflation since 1991.

This year he also started with hope in the financial markets. The country's threat fell from 830 points to almost 700 points. As a result, the bands ranged from 14% per annum in dollars to less than 12%. Another basic variable that reflects this better climate is the dollar: it fell almost one passport in eight working days and in the last two days it hardened the floor of the "zone" without intervention ".

The largest retail exchange rate lasted at $ 36.90, 55 cents below about the opening of the exchange floor on Monday, set at $ 37.45. This lower tar is maintained at 2% per month. By the end of March, therefore, the dollar should trade at least $ 39.38, closer to $ 40 at present $ 37.

The model chosen by Central Bank and IMF is to be deleted; to make a foreign exchange market stable and expects lower levels of inflation to work according to their plan. There was a tight control over the money in circulation and a sharp jump in the level of interest; in the "money screw". At the same time, the two effects aimed at bringing the dollar to the ground floor without interventions. And exactly what happened.

Now the model went into the "level 2", that is, hit a dollar on the floor on its exchange band and bring it to the Central Bank to support it. The entity purchased USD 60 million between Thursday and Friday but did not break the money.

Including the last sections of the # 39; Argentina's depreciation (in 2014 and 2016, for example) The exchange rate issue is not responsible for the exchange rate. There is no decision that the scheme designed by the IMF has been set up "tablita" with a daily change to establish the floor of the dollar. The settlement behind this scheme, in particular, is to delay the dollar to keep the inflation voluntarily in the election year. As it was always done in Argentina.

The government has two alliances: a real reinforcement in Brazil since Jair Bolsonaro was won and the weakness of the dollar in the world, as the Force Reserve could delay the uptake. Both elements will mean that the exchange rate is </ p>; retaining certain competitiveness, even though it is still behaved or needed. The problem is that inflation is a? maintain the worry and also threaten "eat" that is; grow in competitiveness.

The multi-side internet exchange program is now 115 points. It is almost 18% lower than the fall after August, when the dollar was more than $ 40. But the income later and to restore the money; practical solution he received.

The interbank exchange rate in April, just before the exchange rate began, was 90 points. That means that the dollar really remains almost 28% higher than nine months ago. The challenge now is to preserve that competitive development, that is, without delaying the exchange rate again.

Amongst economists, the debate has already begun the best formula to settle the dollar with the "uninterrupted zone" floor. The same issue is already installed in the economic team. Guido Sandleris prefers to move slowly; It is a final test and error game, as this is a new situation for Argentina.

By going out to buy a & # 39; allows BCRA to collect backstores and to prepare better for the months running up to president elections. But at the same time it means that pesos will be banned, and if you do not, They could be multiplied, which could be revived in inflation. That is what happened between 2005 and 2007: protection of high-level exchange was completed in a large amount of pesos and replenishment inflation, which could not be controlled until now.

Another option is to include faster participation levels that are in place; falling faster, and almost this week, from 59% to 58.5Annual% in Leliq case. Reducing the rate may be faster, but it is also a danger. If the lawyers do not feel satisfied with what the banks do? pay for their established conditions, they can return to the dollar quickly and build far beyond the floor of their bands.

The other option is to reduce the resources to banks, at registry levels. In this way, some of the "maintained" pesos will be released, but they will help & # 39; Central Bank to meet the goal of zero distribution. Therefore, it is not easy to reduce that restriction.

The position for the next three months could affect the movement of these first days in 2019. A dollar was pronounced by its & # 39; public and companies to the lowest definition. The lack of tourism fairness also reduced significantly and the commercial certification was reversed.

The wheat harvest was better than expected and put USD3,000 million through March. Then the soybean harvest (which also comes as expected) will come and also there is a lot of extra dollars in the Finance Department that need to be translated into pesos.

The overall Government priority is to come to October elections without a huge surprise on the dollar. It needs a small-scale stable exchange rate, to reduce levels of uncertainty and to change the overall problem after a major economic problem.

In those days the debate will proceed if it is useful to accelerate the reduction of rates. The benefits – at least obvious – would be both: to add to the dollar a little while at the same time; giving relief to the SMEs, expressed by the lack of credit, sharp increase in cost of money and falling in sales.

With an inflation rate that is expected by 30%, there is a 58% rate per annum; appear high. However, Everything in motion is slow. 2018 souvenirs are still new. Everything started when Central headquarters Federico Sturzenegger agreed, then reducing rates after Casa Rosada then changed the inflation rates. The beginning of a long way of mistakes came to an end in a fall that will take a long time to rise.


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