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First bad news for the minister: Guzmán left the Central without dollars to face the strong demand for future dollars

The hardest hit will come from the futures market REUTERS/Dado Ruvic

Although it is a holiday in the United States, the foreign exchange market today is going to operate as a business and intense day. The debt bonds in dollars and the shares will not have the reference of the main market in the world.

All speculation last night revolved around crypto dollars. The price of some crypto currencies in pesos, in the crypto exchanges, marked a dollar that reached $303. But as any game based on assumptions has its risks, they are not representative prices.

Another fact of the crisis was seen on Saturday night, with the decrease in customers in the different restaurants. It was the hiring of a Friday where the gastronomic activity was in full swing. What everyone agreed on was the increase in prices in those food places and in supermarkets and shops.

Today, everyone is going to be looking at the different dollars. The biggest hands will be behind the MEP and cash with liquidation. The “blue” will be the object of attention of small and medium savers and those who received the Christmas bonus. There will also be a long wait in the computers for the banks, if the operation is not suspended, to sell them the quota of USD 200 per month of savings dollar that on Friday closed at 215.54.

But the hardest hit will come from the side of future dollars. On Thursday, the Central Bank, faced with private demand for the different ends of the month, sold USD 1,000 million and was unable to lower prices, which rose up to 0.60 percent.. On Friday, month-end purchases by private individuals were more intense and the rise reached 0.82% at the end of December where the dollar, which the previous day traded at $173.35, closed at $176.75 despite the fact that the Central Bank sold USD 2,000 million.

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“On Friday, the foreign exchange market operated calmly because due to the United States holiday, the North American counterpart stopped working early and the local desks stopped working shortly after noon. The dollar was calm. But the futures market worked hard because by not giving the Central to importers access to the official dollar, they were buying all week and the Central in all wheels was a seller to calm prices, although he did not get it the way he intended. ”, said Nicolás Rivas, trader at Buenos Aires Valores (BAVSA).

Martin’s Legacy

So, the first bad news for the new economy minister: the quota of dollars that the IMF enables to intervene in the futures market was very reduced to face the strong purchases that there will be today for the different ends of the month. From July to December, private companies will seek coverage and prices will rise because the hands there are very large.

Guzmán in his last week, flooding the peso market and drying up the Central Bank's dollar reserves
Guzmán in his last week, flooding the peso market and drying up the Central Bank’s dollar reserves

Exporters and importers must cover their costs and for this reason, when the ticket price rises at the end of the month, the implicit rate reached an effective annual rate of 120%. They will not be present today in the wholesale market, because exporters will take advantage of the holiday not to liquidate foreign currency, something that can be repeated throughout the week if they do not announce what the rules of the game will be, and importers know that any attempt to buy dollars at the official price for a while will be in vain.

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On the other hand, in the minds of the private sector is that USD 190 million were sold on Friday, that the reserves lost USD 192 million and remained at 42,592 million because USD 250 million of energy imports were paid.

The other concern that awaits the minister will be on Friday when she will have to face maturities of USD 700 million in bill dollars for interest on the debt securities.

Not to mention what will be the negotiation of the debt with the Paris Club, which was in charge of Guzmán.

The demand for cash with liquidation and MEP will be high and will coincide with the drop in AL30 and GD30 bonds, which on Thursday and Friday had rehearsed a recovery.

The contradictory fact that the bonds rise Thursday and Friday and the future dollar as well, indicates that nobody in the Government imagined the outcome of Saturday. If anyone had gotten the news that Martin Guzman was going to resign, the future dollar would have flown higher and bonds would have plummeted.

The Treasury Bonds indexed by CER could support another avalanche of sales and it will be necessary to see if the Central Bank maintains its policy of buying them to preserve their price. It is not known what the relationship of the new minister will be like with Miguel Ángel Pesce, the head of the Central Bank who did not reap the sympathies of Kirchnerism. But something should be done on this issue because the debt is too high and rising inflation does not tempt to have them in the portfolio. The Treasury has 82% of its debt in index-linked bonds, so it is not liquified by inflation. The “Treasury Risk” will be more present than ever in this new management.

File image of a trader working at the New York Stock Exchange, USA.  June 16, 2022. REUTERS/Brendan McDermid
File image of a trader working at the New York Stock Exchange, USA. June 16, 2022. REUTERS/Brendan McDermid

That is why investors choose corporate bonds pegged to the dollar, because they believe that higher inflation will force a devaluation. If the futures rate is taken, it can be deduced that they estimate it between 30 and 50%.

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The other problem is going to be the money changers in the “blue” that on Friday, due to the rumors of exchange rate split, they saw how the post-closing dollar marked a price of $240. Those who closed operations to pay on Monday are afraid that they will not be fulfilled.

The unknowns about the new management are many and that means coverage, that is, a more expensive dollar. What is worrying is the position of Guzmán’s replacement before the commitment signed with the IMF.

The change of ministers was in chess like giving up the queen in exchange for a pawn. Guzmán responded to Fernández, Batakis to Cristina Fernández de Kirchner. The one who delivered the lady was the President.

What Martín Guzmán and Silvina Batakis have in common is that neither worked for the private sector. One was a professor and the minister, since 1992 he held public office.

KEEP READING:

According to Joseph Stiglitz, Guzmán’s “profound principles” made it impossible for him to continue in government
Former minister of Scioli and current official of Wado de Pedro, who is Silvina Batakis, the new Minister of Economy

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