Monday , November 23 2020

BCRA took advantage of the exchange rate calmly to zero its position in dollar futures




Source: Archive

The Central Bank (BCRA) took advantage of currency security over the last two months of 2018 to reset its position on the foreign exchange market, which quickly complied with a proposal received by its central bank.

International Monetary Fund (IMF).

The company reported the data today by disseminating the minutes of a new meeting of its monetary policy committee (Copom), a document specifying that the exchange rate "reduced the volatility of both money market and maturity" in December and that private demand for dollar hoarding was reduced to an average of 13 million. USD per day, which means the lowest level since inventory and a figure 12 times lower than the "top" of purchases in the second quarter of the year.

Earlier this month, the IMF had highlighted the progress made by BCRA to reduce its sold position for future dollar contracts by reducing it from the 3,800 million US dollars. US $ as it reached in September (after the president of Luis Caputo, his return for use to signal the development of the ticket to the market) had fallen to US $ 1,600 million.

Then, it is clear that the Central Bank only completed this position in December, thus restoring a tool which, according to which the Agency's recommendation would only be able to lend very carefully.

Interventions via futures are routine in other countries as they allow foreign exchange intervention without affecting reserves. But they were "under suspicion" here after the abuse of this tool by the BCRA in the last years of the government for

Cristina Kirchner,

especially under the leadership of Alejandro Vanoli, who led to a lawsuit which is still pending.

Despite that, and the resistance that might use them in May last year (when the race against the peso was already installed), BCRA was then under the leadership of

Federico Sturzenegger-

He again offered contracts to try to reassure the market, giving rise to signs of allowing the bullish currency to develop, but much more orderly than the one ending up in the market. He had to recognize it after receiving a legal report request made in response to a request by lawyer Carlos Beraldi, who defends Cristina Kirchner in the trial, to demonstrate the use of this tool as usual.

Finally, BCRA remained active in this market as the owners were Luis Caputo, and the IMF was reluctant to spend part of the money that had lent it to exchange interventions. This led the BCRA to have a greater exposure to the 4,500 million. US $, which helped contract $ 22.916m $ I monetary bases during October and some profits were achieved.

Now for the Copom members, these market conditions were those that allowed BCRA to "not renew the previously offered contracts", in forward exchange contracts and to "zero" its position in the market at the end of 2018.

Controversy of the counterpart in pesos

The company highlighted this fall in foreign exchange demand as a sign of the beginning of a recovery in demand for pesos, a concept that some analysts disagreed with. "There is no concrete evidence that demand for pesos has improved: the money supply rose by 2.9% year-on-year a year ago, and it did so at 2.1% so I would recommend that differentiate well between the demand for pesos or assets in pesos, which is undoubtedly exacerbated by the high tariffs, "economist Miguel Zielonka observed from EconView's consulting firm.

"It is difficult to quantify how much demand for pesos is encouraged by the high tariffs, but not to note that a large premium to remain in pesos remains firmly so far, that the upswing seems highly supported," said his colleague Juan Carlos Barboza, the condom of the Banco Itaú.

For the BCRA, on the contrary, this increase in the demand for currency "in line with the disinflationary trend is under way" and can open the door of the business after meeting its monetary target for the current month can be reconsidered. over-compliance for February and March, as "there are months of seasonal demand for historically lower money". However, it announced that it would publish any overshoot "at the beginning of the corresponding month" after its calibration "based on the construction of the demand for currency until that moment".


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