March 12, 2014
Blue dollar plunges 39 cents
Parallel rate continues dropping as devaluation accelerates
The parallel or so-called “blue dollar” exchange rate fell 39 cents to US$9.18 yesterday, following the sharp drop witnessed last week as the exchange rate’s downward tendency continued while the official rate increased, reaching $6.165 pesos per dollar.
The rising momentum of the depreciation of the official rate and appreciation of the parallel exchange rate was supported by the Central Bank’s continuing bond sales. This is the government’s recent strategy, although it is using indirect methods in order to avoid directly intervening in the market.
In the past few weeks, organizations belonging to the government sold bonds in order to lower the price of the dollar “contado con liquidación” having repercussions on the informal dollar market, reported several financial consultancies. On the other hand, the official dollar continued its gradual devaluation, advancing one cent and a half in exchange rate bureaux and banks throughout the city, reaching $6.115 pesos (buy) and $6.165 pesos (sell). Currency dealers said that the government’s objective was to reduce the dual exchange rate breach below 50 percent, which it was finally able to achieve yesterday. The last time the gap was below 50 percent was last July. At the same time, the country’s risk fell to its lowest levels since September, 2011.
A financial consultant said that the decrease in the “blue rate” was because of the influx of dollars via the “sale of bonds in the United States which were then transferred via Uruguay to Argentina.”
With the Central Bank selling 120 million dollars just yesterday, its reserves are estimated to have fallen below the US$31-billion mark.
Grain sales affecting reserves
Grain and oil seeds exporters liquidated last week US$179.3 million, 43.6 percent less than the US$31.2 million dollars which had entered the market during the same period a year before. This was reported by the CIARA Argentine Oil Industries Chamber and the CEC Centre for Cereal Exporters. So far this year, exporters have liquidated a total of US$21.98 billion, just above the US$21.53 billion registered in the same period last year.
The difference is because the volume grain harvested this year surpassed 105 million tons, increasing 16.5 percent from last year. But with only four weeks left until the end of the year, the dollars coming in from grain sales is still far from the US$25.13 billion dollars which entered in 2011, when the harvest reached a record 104.3 million tons.
Cabinet Chief Jorge Capitanich pleaded with soy producers to “stop speculating” because the “trend for soy prices was decreasing.” The Cabinet chief claimed that the downward tendency of the soy market would have “an impact with regard to the country’s reserves.”
Capitanich said that there were more than US$6.3 billion worth of soy profits which had not as yet been liquidated.
Highest devaluation in more than four years
The devaluation so far in the past month is the highest in the last 56 months and this year’s advance is the highest in the past decade. The depreciation has progressed so much that in the last two months, its rate has been higher than inflation in the same period, according to several different financial consultancies. The peso has depreciated 25 percent in the past year. In November, it depreciated 3.55 percent, with the dollar passing from 5.91 to 6.12 pesos.
The Central Bank has decided to make a stand against the double-digit inflation witnessed in the past year, leading to the country’s products and services becoming more expensive in international markets. When comparing the country’s depreciation rate with other regional rates throughout the region in the past year, Argentina’s is the highest. Brazil follows with 14.33 percent, Uruguay with 10.55 percent, Peru with 9.56 percent, Chile with 9.38 percent and Colombia with 8.92 percent.
Herald with DyN, Ambito.com