Analysis of the Dollar Price in Argentina After the Elections
Analyzing the dollar price in Argentina after the elections poses a challenge in the market.
Traders and market analysts are making predictions regarding the Argentine peso’s exchange rate for the day after October 23rd.
These expectations are far from being precise predictions, but they indicate a willingness to hedge against potential market turbulence.
The Primary Open, Simultaneous, and Mandatory Elections (PASO) are behind us, but they had a significant impact on the market’s trajectory.
Surveys, once again, failed to predict the political landscape that would emerge after August 13th, forecasting a 17% devaluation of the peso in the formal market.
The idea of a future dollarization with Javier Milei and a package of measures to counteract the soaring inflation, equivalent to one percentage point of GDP, promises to make an impact on the market due to the injection of money. This implies a substantial change in asset prices.
Analysis of the Dollar Price in Argentina: Elections
One of the pieces of information that traders have clearly incorporated as significant is the expiration date of exchange rate stability in the wholesale market.
On August 14th, when the Central Bank allowed a 22% increase in the wholesale dollar exchange rate, it simultaneously communicated that this exchange rate would remain stable at least until the October elections.
In other words, in the days following, it had no obligation to maintain the price fixed at $350 per unit.
“As an illustrative example, if inflation in September is 12% and in October it’s 10%, the real exchange rate on October 23rd (post-election) would be 5.5% lower than on August 13th (pre-devaluation). Furthermore, if the freeze were to extend until November 21st (post-runoff), it would be 13.7% lower,” analyzed Portfolio Personal Inversiones (PPI).
A move in the official dollar market would logically have consequences for other exchange rates, as was seen on August 14th after the PASO.
However, the expectations of traders in the futures market are far from being a precise prediction; instead, they serve as a risk hedge, considering other variables at play.
“There is growing anticipation that after the ‘soybean dollar 4,’ exchange rate pressures may intensify, as the exchange rate imbalance would worsen, and the chances of a new devaluation post-October 22nd, following the impact of accelerated inflation erasing competitiveness gains, are increasing,” said analyst Gustavo Ber.
“Soybean Dollar”
This new version of the “soybean dollar” allows exporters to have 25% of the foreign currency they liquidate as “freely available.”
This means they can sell it in the “cash with settlement” market, at more than 100% above the official exchange rate.
Although analysts admit that surveys are not the best tool, they cautiously use them to shape their strategies.
The analysis of the dollar price in Argentina is closely related to the political electoral environment.
“A scenario of lower volatility may perhaps be a runoff between Patricia Bullrich and Milei, although it does not currently appear as the most likely one. But lower volatility does not mean that we won’t experience turbulence from other angles, because in that scenario, there might be some exchange rate fluctuations depending on Massa’s numbers, as the market might end up correcting it based on how we’ll arrive,” added research specialist Salvador Vitelli from Romano Group.
Also read: The Increase in Gasoline Prices in the United States Boosted Inflation.
