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Argentina bids farewell to the band: to intervene in the foreign exchange market to reduce volatility


A statement was made trasandino weight regain ground against the dollar and the country risk, to withdraw from the recording era Macro.

Government Mauricio Macri is tried literally everything to contain the escalation of the dollar, inflation and the growing mistrust that is generated among investors in the political landscape, on the presidential elections in October and the possible return of former President Cristina Fernandez in the Casa Rosada.

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Yesterday the Argentine Central Bank (BCRA) has been forced to change strategy and to challenge the agreement reached last year with the International Monetary Fund (IMF), announcing that he would have to sell dollars in the field of non-interference, whose ceiling has been set at 51,448 pesos dollar.

This measure resulted in the Argentine peso to gain position and country risk was reduced after reaching 1100 points bases last week, writing in the age of Macro. There were also improvements sovereign bonds and further losses in equities, with careful changes in the rules for market investors.

with the support of the IMF, once again, the change of administration in the & # 39; yavah based search "to refer to the recent financial market volatility and exchange rate." "We support these measures, which are appropriately calibrated to the problems faced by Argentina," he said in a statement, Jerry Rice, the chief representative of the Foundation.

Measures taken in the details

The Monetary Policy Committee (Copom) Central Bank announced its decision on the condition "that dominate the dollar rally," and said the number and frequency that will be used will depend on the dynamics of the market.

If the exchange rate exceeds the fixed ceiling, the issuer will also increase from $ 150 million to $ 250 million for & # 39; The volume of daily sales, provided until now.

"We can also determine the performance of additional episodes to deal with excessive volatility in the case of the need for intervention," the financial institution said.

"We have a lot of intervention mechanisms; auction they will be one of them, "they said in an institution under the direction of Guido Sandleris newspaper El Cronista.

"The ability to intervene and sell dollars positive as it is to reduce the volatility of the market," the report said Morgan Stanley, which said that "some relative stability in the foreign exchange market will contribute to improving the dynamics of inflation and the outlook for the future, a weak positive impact on economic growth" .

"All the weight of absorbed thereby (with new bank measures) will reduce the target for the monetary base, which leads to a further tightening of monetary policy," said Ezequiel Zambaglione, an analyst at brokerage Balanz.

dollar management

The central bank also aims to keep most of the current is controlled by the unusually high interest rates to be charged for renewal letters «Leliq» level in the second contest yesterday rose to a maximum of 73.65%.

Meanwhile, the Argentine peso on the interbank square appreciated 3.56% to 44.37 units to the dollar, compared with the record high hit last week of 46.55 pesos per US dollar.

During 2019 trasandina currency has gained a sharp drop of 15.03%. Last year, he lost more than 50% of its value, during the exchange term, which led to the agreement of $ 57.100 million US dollars from the IMF.

The news was also reflected positive risk index Argentine country, developed by the bank of JPMorgan, which fell 23 basis points to 940 basis points, while credit default swaps (CDS) Argentina's debt reached back a little at the level of 1218.06 points.

Meanwhile, OTC sovereign bonds are rearranged, and showed an average improvement of 0.7%, led emissions, expressed in dollars.

At the same time, the shares of S & P Merval closed with a marked loss of 3.69%, similar to the levels of the end of December. This market has come to accumulate a decrease of 6.63% last week.

The third Latin American economy is in a recession that will lead to a reduction of 1.2% this year, according to the IMF, which argues that the crisis has bottomed out, and that by 2020 the country will have the recovery and the economy will expand.

At the same time, inflation remains at a rate of about 50% on an annualized basis.

a new honor

The IMF yesterday gave a new impetus to the government macro taking a lot of freedom in the management of the market, in spite of contrary agreement.

Appearance is set to the high volatility of the last few days and the specter of the context of the presidential election. In this regard, according to El Cronista, the Foundation technicians, and they are once again preparing to return to Buenos Aires.

In mid-May, a team led by Italian Roberto Cardarelli come to the country to verify the evolution of variables and promised to move forward with discussions with Sandleris and the Ministry of Finance, Nicolas Dujovne.

Fear, at some point, short of how much intervention can be made to work and that the market does not overreact to any particular measure.

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