June 14, 2021

The dollar in Argentina overheats amid the health emergency



The price of the US dollar in Argentina advanced significantly on Monday amid fears over the economic effects of harsh measures to try to curb the spread of the SARS-CoV-2 coronavirus (causing the disease of COVID-19), and the highest emission of Argentine pesos with which the local authorities seek to meet their spending needs in the face of the health emergency.

The value of the US currency rose 25 cents for sale to the public in the state-owned Banco Nación, up to 66.75 pesos per unit.

In the informal market, the US currency advanced 3.75 pesos, to 88.75 pesos for sale, while in the official wholesale market it rose 22 cents, to 65.38 pesos.

DISTRUST

For the economist Salvador Di Stefano, the rise in the price of the dollar together with a greater outflow of deposits from banks is related to the growing mistrust among investors regarding measures adopted by the Argentine government, in a context of bulging public debt and a economy in recession for two years and hit harder by isolation measures by COVID-19.

“The government a week ago said that it would not pay the public debt bonds under Argentine law, to this we must add that they became infatuated trying to put a new tax on personal property, money laundering or wealth. This generated high distrust and the worst happened, a very strong outflow of deposits began from the financial system, “observed the economist.

The appetite for “dollarization” is also verified in the escalation in the value of the dollar of the mechanisms for more sophisticated investors.

Thus, the so-called “cash with liquidation” dollar – which consists of buying shares or bonds locally with Argentine pesos and selling them, in dollars, on Wall Street – rose today to a record 102.30 pesos per unit.

For its part, the “dollar bag” or “MEP dollar” -which is achieved by buying assets that are listed both in pesos and in dollars, are paid in pesos when purchased and sold in dollars- rose today to 101.23 pesos .

HIGHER MONETARY ISSUE

Not only mistrust pressures the exchange rate, but also, according to experts, a greater monetary issue by the Argentine Central Bank, at a time when, due to the paralysis of a large part of economic activity due to isolation measures, the The government sees its tax collection drop, while increasing its spending needs to respond to the health emergency and help the affected economic sectors.

“The upward pressure on the exchange rate would continue in this scenario, where the issue is growing and strong, the uncertainty about the debt restructuring remains and the external scenario remains volatile,” the brokerage firm warned in a report on Monday. Stock Market Personal Investment Portfolio.

For the firm, if the government presents a “good offer” of exchange to private creditors, this “would put downward pressure on the exchange rate”, but if the days go by without news in this regard, the dollar “has been settled.” will increase and the pressure on the exchange rate will continue, even more with a “strong” monetary issue and increasing inflation, “where expectations are rising and the speed of circulation is increasing”, since “people are getting out above the pesos faster, buying capital goods or buying dollars. ”

He considered that the “gaps” between the official value of the dollar and the prices in alternative prices will also tend to increase, “since although the official price continues to rise, it does so at a much slower rate where the Central Bank intervenes.”

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