February, a new test for the dollar price: the factors that can give it a boost

IPROFESIONAL – Everything is changing in Argentina, especially the price of the dollar, which at the beginning of February is very calm, but the analysts consulted by iProfesional warn that this situation may change throughout the month, because the Government will have to face challenges important economic.

The current X-ray shows that the value of the different exchange rates that are achieved in the market (official, informal and stock exchange), has a relatively stable behavior.

Even the blue fell to $ 151, a reference that after a long time is located below the “solidarity”, which is the one that is bought in the official square and represents the price on the retail board plus taxes.

This situation, which is “ideal” for the Central Bank, will have to face a series of factors that the Government will have to overcome, from the economic point of view, in the coming days.

In particular, Roberto Geretto, chief economist of the wholesale bank CMF, alerts iProfesional that there will be 3 aspects in February that will be key to the behavior of the dollar price:

-The seasonal drop in the demand for money, which is the opposite of what happens in December and the first part of January, when many pesos were required to pay the Christmas bonus, year-end debts and vacations, among other commitments.

-This is also usually a month of low liquidation of agricultural currencies, where in turn there is a high level of liquidity (pesos) as a result of the monetary expansion that usually occurs in December.

-And for this year, another factor is added, where the banks disarm the Leliqs to go and buy Treasury bonds, something that implies an additional monetary expansion.

“Therefore, the challenge of the Central Bank to take care of the reserves and contain the gap will be accentuated,” Geretto details.

Before analyzing the projections for the dollar for February, made by the economists consulted by iProfesional, these factors that may affect the exchange rate should be considered.

Money demand

When taking the BCRA data, Geretto affirms that in December the money in the hands of the public had an “increase of 8% in relation to the monetary base.” However, in January it began to fall.

To put it in numbers, he adds that in December there was an increase in money held by the public by almost $ 173,000 million, “expecting that in January and February this factor will be partially reversed.”

Agroindustry exports

Another key factor in the price of the dollar is foreign exchange earnings from exports.

In February, also the sales of agriculture find a seasonal plateau, where “the liquidation of the fine harvest has already decreased and we are waiting for the liquidations of the coarse harvest.”

Therefore, Geretto affirms that, despite the better international prices, “the seasonal factor weighs in the day-to-day of the official exchange market.” From the field, the sale of dollars was lower in recent months. The bet is to April and May with higher prices From the field, the dollar settlement was lower in recent months. The Government’s bet is on May, with higher soybean prices.

Low stock of Leliqs and dollar stock

Finally, this economist points out that, at present, banks have disarmed Leliqs to buy Treasury bonds.

“This is equivalent to a macro level to a monetary issue from the Central Bank to finance the Treasury. Until the end of last January, this has generated a monetary expansion of $ 100,000 million “, sums up Geretto.

And he clarifies: “Said disarmament was the product of the introduction of 8% by the City of Buenos Aires to yields in passes and Leliqs, which in practice implies a reduction in the interest rates received by banks (post-tax). for these placements ”.

Something that had an impact on the stock market dollar, which is the one acquired on the Stock Exchange, with the purchase and sale of shares and bonds that are listed in both pesos and US currency.

Thus, there is a cash settlement and MEP dollar that have risen in recent weeks, to $ 152 the first and the second to $ 150.

“These prices represent the highest levels since October, when at that time greater exchange rate tensions were perceived, and greater restrictions were being introduced to the operation in the official exchange market, as well as in financial dollars,” Geretto details.

Especially the cash with liquidation, began to rise in price in the last weeks. The free dollar, especially the cash with liquidation, began to rise slowly in price in the last weeks.

What will happen to the dollar in February

Now, beyond these factors mentioned that affect whether there may or may not be a new rise in the dollar, iProfesional consulted various economists to make their projections regarding what could happen to the exchange rate in the current month.

The wholesale dollar accumulates a rise of 4.6% in the short time that passed in 2021. Today it has a value of $ 88.

According to the Market Expectations Survey (REM) carried out by the Central Bank, among different analysts, the median price expected for the end of February is $ 89.2. Therefore, if this forecast comes true, it would rise 2.4% throughout the month.

“In the official market, a slight change in the price update strategy is perceived, with a slide that, for now, looks lower than that of the previous month. We will surely see a devaluation rate somewhat lower than in the last two months ”, Gustavo Quintana, analyst at PR Cambios, tells iProfesional.

Meanwhile, in the free segments it is expected that there will be an increase in the price of the Stock Market dollar, but in the projections there is no consensus that an abrupt jump will be registered.

“In the rest of the markets, everything will depend on how the Central Bank will handle the absorption of excess pesos, to avoid pressures on prices, always with interventions that will aim to narrow the gap”, summarizes Quintana.

For Geretto, due to the monetary effects described above, a MEP dollar and a cash with liquidation awaits that “are on the rise, although an abrupt jump is not expected, given the restrictions on operations and official interventions.”

On the other hand, economist Andrés Borenstein, associate director of Econviews, considers iProfesional that in February the official dollar “could move in line with expected inflation.”

Thus, this analyst expects a wholesale exchange rate for the end of February at $ 90.8, while in the stock market he projects that the cash with settlement will advance to $ 158.9 per dollar.

“This implies a devaluation of between 3.5 and 4% per month in relation to the official dollar. If the Central Bank wanted a lower devaluation, it would surely have to lose reserves, ”says Borenstein.

Meanwhile, for market dollars, he notes that “there are not many expectations of a strong drop in the gap, rather 70% seems to be a floor in the short term, although after an agreement with the IMF it could go closer to 60 %. But for that, it seems, there are a few months to go. ”Economists estimate that the dollar will rise immediately at the same rate as inflation Economists estimate that the dollar will rise in price, immediately, at the same rate as inflation

For Guido Lorenzo, LCG chief economist, the official dollar will replicate the devaluation rate of inflation in January, of around 3.7%.

“If the Central Bank does not react with a rate hike, there could be pressure, since it seeks coverage against the dollar and inflation, in a month where the demand for pesos falls seasonally,” he warns.

Likewise, Lorenzo considers that the interest rate paid to savers was misaligned with the rate of price increase.

“In any case, we expect the BCRA to react with an increase in the retail rate, to improve the performance of retail savers,” concludes this economist to iProfesional.

Regarding the blue dollar, Lorenzo affirms that it is the one that “suffers the most from the misalignment of the rate”.

And he concludes: “The saver seeks refuge in the dollar, and if they begin to disarm fixed terms to switch to the dollar, it can generate upward pressure.”

According to the perspective of Natalia Motyl, an economist at the Fundación Libertad y Progreso, she expects that throughout February the dollar “will begin to rise”.

Thus, she indicates that it is “likely that the blue dollar will begin to rise in the next two months, but the rise will not be as substantial as expected at the end of last year.”

For this reason, according to Motyl’s opinion, “everything will also depend on whether the agreement with the IMF is accompanied by any reform that will bring tranquility to the exchange market. Or if the paid debt is increased even more from the Central Bank, which absorbs the surplus of pesos “, she lists iProfesional.

Obviously, she warns that, without a comprehensive economic plan that includes structural reforms, “it is very likely that this rise in remunerated debt will translate into future issuance.”

However, it must be taken into account that the pressure of the dollar could be tempered by the inflow of foreign exchange that is expected between March and May.

In summary, for Geretto, in the long-term analysis, in a context of macroeconomic normalization, the price of the stock dollar “should lag behind inflation, since both the MEP and cash with settlement, and the blue as well, are rates of high real changes, being maximum since the exit of the convertibility “.

For this, it must be taken as a reference that, in a context of high exchange rate uncertainty, as happened last October, the “conta con liqui” overreacted and touched $ 180 and the blue cost about 200 pesos.