BUENOS AIRES – Argentina’s foreign exchange market experienced increased stability Tuesday,with foreign exchange offerings in the Single and Free Market (Mulc) reaching US$570 million,following the International Monetary Fund’s (IMF) approval of the first review of its program with the country. Though, analysts caution that upcoming elections could introduce renewed volatility.
The IMF’s approval, confirmed last week, came with modifications to the original agreement. The target for net reserve accumulation was lowered to US$5 billion, from a previously undisclosed higher figure, and inspection frequency was reduced from quarterly to semiannual. The original agreement, signed in February 2023, aimed to restructure Argentina’s US$44 billion debt with the IMF.
Economists note a “restrictive bias in the money supply” continues to influence the market.Despite this, “Pass Through seems to be limited so far,” according to specialists, contributing to the current calm.
Matías Waitzel, a partner at AT Investments, stated the current market movement is “totally normal” and anticipates further stabilization as election uncertainties diminish. He spoke to Ámbito, an Argentine financial news outlet.
Wholesale Dollar Stabilization Predicted
Gustavo Ber, an economist, predicts the wholesale dollar could stabilize around ARS$1,350, citing increased supply from liquidations and demand for ‘Carry’ trades – borrowing in currencies with low interest rates to invest in those with higher rates. This stability is contingent on the absence of price transfers, as real interest rates remain high.
Financial analyst Christian Buteler,via X (formerly Twitter),reported a 1.58% decline in the wholesale dollar,marking its third consecutive fall,and a downward adjustment in all future dollar positions. Buteler’s account, @cbuteler, has over 18,000 followers.
Context: Argentina’s Economic Challenges
Argentina has struggled with economic instability for decades, including high inflation, currency devaluation, and debt crises. The current IMF program is a critical attempt to stabilize the economy and address its long-standing financial vulnerabilities. Inflation in argentina reached 113.4% year-on-year in March 2024, according to INDEC, the national statistics agency. The country’s presidential elections, scheduled for October 2024, are expected to significantly impact market sentiment and economic policy.
