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Dollar: Stopping it requires aggressive rate hikes, traders say

2020-10-26T02:23:46.317Z


On Friday the government made calls to avoid operations and to keep climbing the price of the currency. So far the adjustments, which seek to increase savings in pesos, have not worked.


Laura Garcia

10/25/2020 10:01 PM

  • Clarín.com

  • Economy

Updated 10/25/2020 10:01 PM

The week ended with a hint of reminiscence (when in the time of Guillermo Moreno they sought to appease the dollar

with a simple call

to intimidate the City) but with as few results as the previous one.

At the end, the financial dollar collapsed before the official "suggestion" that operators should run out of the market and a blue that fell a

few boxes to $ 189 after reaching $ 195.

But nervousness was still in the air before the 

Imminence of a possible devaluation

that, the Government reassures, will not happen.

While the truncated measures are piling up, the market is demanding a more aggressive interest rate hike in the face of such an exchange rate crisis to increase the attractiveness of saving in local currency

(until now it has been administered with a dropper).

Of course, they believe that at this point it must

necessarily be part of a

much more comprehensive

plan

, a card to play even in the framework of an orderly devaluation.

Last week, when the rate didn't budge, the market was thrown out of place.

Gabriel Caamaño, from Consultora Ledesma, explains that today the monetary policy rate is a weighted average between the repo rate and the Leliq rate.

Both repos and Leliq are debt of different terms of the BCRA to which only banks have access.

What the BCRA has been doing is lowering the Leliq rate and raising the repo rate.

But the end result is marginal.

"If you do the weighted average in each of these movements, the monetary policy rate rose 0.5%, which is nothing in the context of the exchange rate crisis. It must be clearly raised. It is behind the devaluation rate of the official and that is totally inconsistent because it means that you

are leveraging the run

. But since the rate is not enough. "

That is, the opportunity is being given to borrow cheaply in pesos to buy dollars.

Today the passive pass for one day is at 30%, the one for seven days at 33% and the Leliq at 36%.

Nery Persichini, Head of Strategy at GMA Capital, points out: "A new rate hike should be

 more forceful to see greater effectiveness.

The average rate at which banks access is 5% negative versus expected inflation in the next few months. In turn, the rate that savers receive is negative 13% in real terms. "

"In any case," he adds, "

higher rates are not a sufficient condition to reverse the crisis of confidence

. They must be accompanied by a solid economic plan that includes fiscal consolidation, monetary moderation and some indication of an exchange rate unification scheme in the future. The IMF could be a key player in giving it credibility. "

Fernando Marull reviews: "In this context, the BCRA

it sold about $ 160 million last week.

It has less than $ 1 billion of liquid reserves left and $ 5 billion if we include gold.

 The market has already taken the pulse of the economic team

.

If you insist on "gradualist" measures, the uncertainty will not go down.

The market demands a plan, a devaluation with a program, a change of cabinet, a sharp rise in interest rates and an announcement of a credible fiscal adjustment. "


Federico Furiase, director of Eco Go, admits: "Now, an increase in the rate

would only make sense in the framework of a stabilization program with the Fund

that allows to increase the reserves and alleviate the expectations of fiscal deficit / monetary emission, to moderate the expectation of devaluation, within the framework of an orderly devaluation ".

And he adds: "Raising the rate with an exchange gap above 100%, without net liquid reserves in the BCRA and with an expectation of gross monetary issue of around one trillion pesos in the coming months

will not offset the devaluation expectations / inflation ...

"

Guido Lorenzo, executive director of LCG, is on the opposite side of this debate: "These crises are not resolved with rate hikes. Devaluation expectations are already so high that one would have to have

a ridiculously high interest rate

and that It would impose a lot of quasi-fiscal costs on the Central Bank (interest on the debt issued) ".

Source: clarin

All business articles on 2020-10-26

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