‘Blue dollar’ almost AR$600 as primaries approach

The informal exchange rate rose by ARS$22 over the course of Monday

Argentine banknotes of 1000 pesos and american one hundred dollar bill

With the primary elections six days away, Argentina’s informal dollar exchange rate — popularly known as the “blue dollar” — rose by AR$22 on Monday and reached a record nominal value of AR$596. The foreign currency has jumped by AR$36 since August 1.

“In Argentina all pre-electoral periods there is a strong tendency to seek refuge in a very solid asset, which in Argentina’s case is the dollar,” said Gustavo Quintana, an analyst and broker for PR Corredores de Cambio. “The 600 mark, with today’s increase, isn’t very far away.”

While the “blue dollar” saw the largest jump (increasing by 3.8%) other parallel exchange rates also rose: the blue-chip swap rate rose by 2.1% and reached AR$598 while the MEP dollar increased 0.4% to AR$ 517. 

“Today’s increase isn’t surprising, it has to do with tightened dollar restrictions, the increase in the parallel exchange rates, and the primary elections coming up on Sunday,” he said, referring to the National Securities Commission’s new restrictions on buying dollar bonds. “That creates tension in the exchange rate and deepens the dollarization process.”

Meanwhile, the official dollar exchange rate, which also increased, is currently AR$295 per unit. The gap between the informal and official rates, known as the brecha, reached 102%.

Other factors aside from the upcoming elections include inflation, protracted negotiations with the IMF, and record-low international reserves. The Central Bank postponed the publication of its monthly market expectation survey to August 15 in a bid to calm the waters.

On Monday, the Buenos Aires City government also revealed that the capital’s monthly inflation hit 7.3% in July, indicating that prices have risen by 62.3% in 2023 to date. The national year-on-year inflation rate reached a record high of 115.6%.

“It’s possible that it had an effect because it’s usually a predictor of how high national inflation will be,” said Quintana. “At the moment everything has an influence on the exchange rate: it’s a combination of things, not one exclusive factor.”

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