The free dollar increased by more than 5% per day: 4 reasons for the growth

He Last Monday, the free dollar recorded a gain of 60 pesos or 5.4%. per day to US$1180 for sale, leaving it just under $1,195 from the 1st. February.

The blue dollar would therefore extend May’s gain to 140 pesos or 13.5%, which would be higher than estimated inflation for the month, something that has not happened since October 2023. With the wholesale dollar rate up two pesos to $888.50, the exchange rate gap reaches 33.7%, the highest since February 9 (37.7%).

It was about biggest daily increase since January 9 this year, when the free dollar rose by 70 pesos, or 6.7% per day, from 1,050 pesos to 1,120 pesos. The operators told Reuters that there is a noticeable shortage of currency suppliers in the market, so the values ​​tend to adapt to demand in a low-volume location, which for this reason suffers from strong volatility.

1) Reduced rates. Behind the growth of the free dollar is new rate cut Help from the Central Bank, taking into account a certain path to reduce inflation, in particular core inflation, at 6.3% in April. Lower rates – and negative ones in real terms – discourage placements in pesos and, indirectly, provide greater liquidity in demand for foreign exchange.

With coming Javier Miley To the President of the Nation, the Central Bank intervenes in the wholesale market with a managed interbank exchange rate under the so-called creeping peg or 2% gradual devaluation monthly, against the backdrop of declining inflation, but still at a high level, as was the case with 8.8% in April.

2) Delay relative to inflation. It should be emphasized that the free dollar has been losing ground for many months amid rising inflation. In 2024, the unofficial currency will maintain a gain of 155 pesos, or 15.1%, with inflation approaching 70 percent. And in an interannual comparison, the “blue” dollar registered an increase of 142.8% compared to $486 on May 19 last year, with interannual inflation of about 290%.

3) More pesos in the economy. On the other hand, the demand for a free dollar is fueled by liquidity in the economy. It is known that the government proposed to “dry up the peso” in the financial market and stabilize the monetary base, since if the amount of money with which the economy operates stops growing, inflation will slow down, as will devaluation pressure.

Over the past two months – since mid-March – the monetary base has grown by $3.3 trillion or 30.5%.from $10.8 billion on March 12 to $14.1 billion on May 14. AND money turnover – the main component of the base – increased by $1.6 trillion or 20.5%

from 7.8 billion to 9.4 billion pesos. As there is more money on the street, the liquidity available to demand foreign exchange through alternative channels to official “reserves” also expands.

4) It will take a long time to get agricultural dollars. The upward pressure on the unofficial dollar is also due to what is happening with dollars traded on the stock market, the latter has also been growing, but at a slower pace than the blue one.

About 20% of agricultural exports are paid in the stock market at cash and settlement rates, which have risen to $1,125, the highest level since February 19, with larger foreign exchange earnings from liquid agricultural exports tending to stabilize as financial the market does not have time to absorb all the supply. And in the opposite direction, when export supplies are weak, alternative dollars, including blue ones, tend to rise. This could happen as early as this Monday, because in the wholesale market A total of US$218.5 million was agreed upon.which is an insufficient quantity during the period of high seasonal agricultural liquidation due to soybean and corn crops.

Experts Personal investment portfolio They clarified that “the wheels in which the financial dollar grew the most did not coincidentally coincide with lower supply from exporters.” They noted that “exporters are waiting for the market reaction to the rate cuts to make greater profits.” to mix liquidate, which reinforces the idea that the financial dollar is rising without its supply.”

In addition to the arguments presented, analysts agree that the current upward trend in the free dollar, as well as stock markets, should soften in the short term.

Economist Salvador Di Stefano He said that due to the “overreaction of the government, placing short-term bills at rates above 56% per annum, with inflation falling, we do not see the possibility of the dollar becoming the main character.” It also helps that the government ran a fiscal surplus for the fourth month in April. This makes us think that the non-issuance rule will remain unchanged, so dollar growth is ruled out in the new scenario.”

Gustavo Behreconomist at Estudio Ber, noted that “the recent redistribution of financial dollars is common in the face of each round of rate cuts, but this does not change the atmosphere of calm among operators as they expect flows to mix – coupled with demand constraints – will continue to be key in the short term.”