Wednesday , November 25 2020

What is behind the fall of the dollar and why do the rates fall? – 05/02/2019



There are two behaviors that clearly show a change in the financial market conditions that deepen in early February.

the The central bank will buy $ 75 million a day but The dollar does not respond and the wholesaler continues under the "floor" of the stock exchange.

And on the other side on the opposite sidewalk there is a Investor career towards the investments in pesos with the understanding that interest rates fall and the income that today's savers can achieve is greater than that coming.

The most visible reflection is acceleration in lowering rates of liquidity letters (Leliq) by the central bank. The interest rate was 60.3% per year in December It fell almost 6 points in January and has been down 3 points in just three days in February.

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one fall by a rate per day by Leliq is the most powerful argument for explaining the shift in the market at stake in the short term to the potential of pesos, which in turn favors the weakness of the dollar.

For illustrative data only: in parallel quoted at $ 37.20 , more than one peso under the official and only 10 cents over the wholesale offer that is the lowest on the market. The "blue" is on the floor at the unthinkable beginning of an election year.

Leliq's decline (letters sent by the central bank between banks to withdraw money) drew the following path: at the beginning of December, 60.3% annually on January 2, at 59.41% on December 31, January, 53 , 68% and 5 February at 50.39% with a minimum of 49.47% annually in the bid.

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The Leliq course derives from the offers proposed by the banks on a daily basis to the central bank, which in turn lowers the cut according to the goal of keeping the amount of money within the target of "zero growth" agreed with the International Monetary Fund.

In other words, it is the banks that are they hurry Placing pesos at falling rates in the assumption that at the end of the day and the month rate will beat dollars.

Leliq's lower income, as expected, means a decline in deposit rates fixed term February 5 ended 40.98% when the previous week was over 43% a year.

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One of the arguments supporting the fall in the rate is the expectation of a lower inflation from February. Economists who follow closely the question say that the increase in cost of living in January would have been 2.8% and that in February it would also float at this level as it would play for seasonality in tourism prices, but the increase in rates would contribute directly to a point.

But the most powerful argument for explaining the acceleration in lowering rates goes through the foreign exchange market.

Within and outside the government it is acknowledged that the key to "Veranito" financially, the US Federal Reserve's announcement was what would be very cautious when considering raising interest rates.

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This change of position (it was originally thought that it would increase three or four times in 2019) changed the feeling of a part of the capitals that are now heading towards new countries. Climbing off Argentine bonds Since the beginning of the year they are a reflection.

A key factor that was known yesterday was that paraguay went on the market and put a maturity bond in 2050 and got $ 500 million to pay a rate 5.4% per year. Argentina today would pay more than 9%.

Argentina's country risk fell to 629 points (it would pay 6.29 points over what the US pays), but getting funds out would still be too expensive.

The second point that helps "veranito" is that dollars off wheat harvest (There are anticipated liquidations from the grain companies and it serena much in a market that, even with a dollar in decline, knows that it is a relatively high fare.

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Therefore, there is one "Sliding effect" which is that the more dollars the central buyer grows, the expectation that the ticket continues below the bottom of the exchange band and that it releases the race to go to the pesos locations.

In fact, a recipient was the National Treasury who put Letras (Lecaps) in pesos with maturity after election day opens a source of finance unthinkable four or five months ago.

The Treasury, in turn, has an important letter on the sleeve that is the IMF dollars that it will start selling in late March or early April to fund public accounts.

Already the Finance Minister, Santiago Bausili, announced that it will turn to the market between US $ 6,000 and US $ 11,000 million which will be an important part of the supply of foreign currencies that Argentina will have this year.

Again in recent economic history, the fluidity of the supply of dollars gives rise to economic calm and calls for expectations by the ruling party in the election year.


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