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Dollar Sees Decline Amidst Soaring Peso Interest Rates
The wholesale exchange rate experienced a notable drop on Tuesday, closing at $1,250.00 per unit. This decline is attributed to a combination of factors, including increased foreign currency inflows and the unwinding of dollar-denominated positions. Analysts anticipate the wholesale exchange rate to reach $1.470 in December,a figure considerably higher than the $1.229 projected in the Budget 2026 advancement.
Concurrently, peso interest rates reached thier peak on Tuesday across all variations, a move described by ABC Market of Changes as a “clear attempt to contain the pressure on the exchange rate.”
Impact of elevated Peso Rates on Official Dollar
Gustavo Quintana, an operator at PR, observed a lower trading volume in the wholesale market, characterizing the American currency’s performance as having a “frank selling trend and marked amplitude between maximum and minimum operated.” He noted that the availability of supply led to initial price drops, with the currency touching a high of $1,280 for sale. Quintana explained that “in a scenario of thrust of income from the outside and the disarmament of dollarized positions, prices translated that situation with casualties that in mid-morning made him touch minimum at $1,250.00 per unit.” He added that a slight recovery occurred in the latter part of the day, with the exchange rate closing with minimal gains from it’s lowest point.
Gustavo Gardey, Co-Founder of Bull Road Investments, informed Amit that intervention in the futures market has increased by US$2,300 million in recent sessions, indicating the government’s effort to “mark expectations forward” regarding the projected exchange rate.
Gardey emphasized that beyond futures market intervention, the notable factor has been the reduction of liquidity. He pointed to a “10% increase in lace for Money Market and for a takeover,while the government took the 67% elimination of the elimination of the LEFIs in two tenders.” Gardey elaborated that following the removal of LEFIs, a liquidity surplus of $15 billion was generated, which was subsequently “cleaned” through two tenders.Despite this, a monetary surplus remained, which was sterilized with lace.Gardey highlighted the government’s aggressive approach, noting that rates operated with peaks of 54% on Friday, 112% on Monday, and 80% on Tuesday, frequently exceeding 70% for most of the day. The overnight rate closed around 40%. He further stated that “the Roy Trade Reactive Rays, while there were many LECAPS exits, partly encouraged by the government itself, which generated a very strong rise in short-term rates.”
Inverted Rate Curve Observed
Gardey concluded that the short-term market experienced a significant increase,resulting in a “fully inverted” rate curve. This inversion means that the highest rates are in the short term, with lower rates in the long term, as investors are seeking to “lock in” rates for 30, 60, 90, 120, or 150 days, anticipating future rate declines.
