Central Bank conducts another $678 million dollar sale; dollar strengthens to $1.515 and country risk surpasses 1.500 benchmark
The Central Bank of the country has taken several measures to stabilize the local currency and control the volatile foreign exchange market.
In a recent move, the Bank has reinstated cross controls and the cross restriction for bank managers and their direct family members who operate in the foreign exchange market and financial dollar markets. This decision comes as the Bank aims to curb potential speculation and maintain a stable exchange rate.
The Bank has also intervened in the market, selling US$1.110 million and US$678 million in the past three days to keep the dollar within the exchange band. These interventions were necessary due to the high demand for dollars, with millions of dollars operating in the spot segment (842) and futures (1,211).
The dollar has reached peak values during this period, with the highest recorded at Banco Nación being $1.515. The exchange rate has fluctuated significantly, with the MEP ending at $1.543, the wholesale market at $1.475, and the contado con liqui at $1.567. This has resulted in a 2.5% exchange rate gap.
The volatility in the currency market has led to an increase in country risk. So far this year, country risk has accumulated a 140% increase, as reflected by the JP Morgan indicator. This indicator measures the excess cost of debt and reflects investor uncertainty, signalling a higher risk associated with investing in the country.
In an effort to alleviate these concerns, Minister Luis Caputo has assured that in the coming weeks, payments for the maturities of January and July 2026 will be announced. This move is expected to provide clarity and stability to the market.
Moreover, it is anticipated that US support will translate into more financing to stabilize the situation. The only option to get fresh dollars, as of now, seems to be a 'rescue' from the United States.
The reappearance of the exchange rate gap is one of the reasons why the Central Bank has taken these measures. It is also possible that there will be a decrease in peso deposits in the coming days due to the dollarization of portfolios.
With 24 trading days left until the October 26 elections, these measures aim to ensure a stable economic environment for the country.
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