When the economy minister faced tough January inflation data two weeks ago, Martin GuzmanHe announced the intention to calm the dollar’s rally to ease pressure on prices, and the market did not hesitate. On the contrary, the bond and futures markets have revised their forecasts downward, in line with the minister’s new conviction in the strategy to slow the rate of exchange appreciation. And also according to the sudden braking applied during the first days of the month in the official rate hike. But this situation lasted a few days. Or at least not enough to meet the 25% increase in the dollar that Guzmán has proposed for this year.
Although the wholesale dollar recorded a rise of only 7 cents yesterday, its annual daily rise in recent days is much higher than the targets announced by the Minister and Questions began to arise regarding the concrete capabilities of the central bank to fulfill the desires of the economy. It happens that despite the purchase of a dollar by BCRA, the level of net reserves remains constant, which creates its room for maneuver to tame the currency rate.
The dollar should rise daily at a rate of 20% annually and do so above 50%. An effort has been made to harmonize expectations, but the rate of devaluation has not been reduced in line with what has been said (Martin Polo)
“In January, the dollar saw a daily yearly rise of 60%, and for the $ 102 value that Guzmán says has been confirmed, between now and the end of the year, the rate should be much lower than it is,” Martin Polo, Cohen SA Chief Strategist. “It should go up daily at a rate of 20% annually and it does so above 50%. An effort has been sought to harmonize expectations but the rate of devaluation has not been reduced in line with what has been said. ”Although it is somewhat slower than last month, it is less than the accelerated rally in consumer prices, in February it far exceeded the official target. .
Although delaying the exchange rate is a manual procedure in the pre-election months, some analysts do not believe the true possibilities of achieving this. Even when it is decided to “advance” more strongly in the currency’s value in the second quarter, with crop dollar income.
“Given the situation, the mission seems impossible. Emerging currencies are depreciating and inflation at 4% per month leaves small margins to further delay the real exchange rate. The rate of reduction may decrease with seasonality of the harvest, but it is complicated for the rest of the year. The ability to rebuild net reserves, which today are less than $ 3 billion, will be essential. ” Neri Persicine, Head of Strategy at GMA Capital. According to his calculations, for the wholesale dollar price to fall 25% in the whole of 2021, he should see an increase of 17.2% in addition to the increase recorded so far of 6.7%. In other words, we should see changes of only 1.6% per month or Crawling wedge 21% until the end of the year. ”
The central bank has no return to bear the dollar is moving at 1% and inflation at 3% (neri-perseccini)
The odds of achieving this appear limited, although these days the market appears to be moving in this line. In fact, the central bank significantly reduced its sold position in dollar futures, by nearly $ 3 billion, defusing the problem that began to grow in the worst exchange rates in October. The same is with fears of a sharp devaluation: unlike at the end of last year, practically no analyst or trader expects a strong jump in the currency. However, this does not mean that everyone agrees that the government will be able to control its disparity well below the projected inflation, between 40% and 50% by 2021.
You should see how fiscal deficits and maturities are financed in pesos, especially in the second half of the year. If Central Aid comes back in force, the gap will heat up, ”Bercicini warned, of the main danger that Guzmán’s plans face, starting in July.
Polo agrees, saying, “The central bank has no return to support the dollar in moving at 1% speed and inflation at 3%. Obviously, if you were to introduce a devaluation scenario with a coherent fiscal and monetary plan it would be easier. But today it is the basis of equities. Our estimate is that the devaluation, in tandem with inflation, will be higher. “
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