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Friday, June 2, 2023

Dollar calm: how long will it last?

MEP USD started the month at $360.91 and ended the day down slightly by 47 cents to $360.44 (-0.13%). In trading, the blue dollar started the month at $379.00 and closed at $375.00, down $4.00 (-1.05%). Both types of exchanges showed consistent changes throughout the month, as did CCL.

  • MEP USD: Min: $35.17/Max: $361.83/Variation between Min and Max (1.01%).
  • $250: Lowest: $361.41 / Highest: $376.52 / Fluctuation between Lowest and Highest (4.18%).
  • MEP USD: Min: $38.00 / Max: $373.00 / Fluctuation between Min and Max (2.68%).
  • What is the reason?

    The government, through the dollar-denominated debt announced a few months ago, is intervening in dollar-denominated financial markets to stabilize those exchanges and avoid the use of the dollar as we have seen in recent years. For now, it looks like they have achieved their goal of stabilizing the currency market, as we can see a level of calm not seen in months.

    Is this measure sustainable over time?

    Won’t. While it’s unclear how long this attitude of intervening in the debt redemption program will last, it’s clear the measure won’t last. The IMF does not allow in its agreements to use resources to redeem debts, or even to intervene in financial markets, so this measure may come up in the next proposed revision, if intended or not. Secure new beliefs.

    Why are dollar bills blue?

    While not a unique and definitive phenomenon, the calm in financial markets has led savers and investors to park pesos in the best-selling instrument, creating a so-called carry trade that has led to a drop in demand for blue dollars. Likewise, the possibility of MEP dollars being nearly 20 pesos lower than blue-chip prices also helps reduce demand.

    How long is the rest?

    It is impossible to predict how long governments will intervene in financial markets. Even if they did, there is no estimate for how long they will be able to control the value of the currency itself. This is likely to be a political issue, and he will try to keep his cool until the presidential election, but he personally did not achieve it, because there is still a long way to go, and these measures are policy. They best define this well-known phrase “time of money”, or adapted “time of resources”, if anything not more than Argentina, it is kept in the center.

    What is this peaceful exchange?

    Sudden market interventions to maintain the exchange rate at a certain value against the backdrop of inflation and devaluation can cause exchange rate delays of several days. The market usually adjusts to this type of mismatch and pauses for a wheel or two when the intervention stops and peso investing is no longer attractive.

    The big upside of this situation is that it benefits those who are trying to dollarize their savings with the MEP Dollar, as well as those who decide to take advantage of the opportunity and peace of mind to trade. My suggestion is to focus on the rate of change.

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