The informal exchange rate, popularly known as the “blue dollar,” jumped by AR$10 on Tuesday and reached a record high value of AR$560 to the dollar.

Tuesday’s surge is part of a sharp rise that started three weeks ago, during which the “blue” dollar increased by AR$65 — more than 13%.

Meanwhile, the blue-chip swap rate rose 1.4% and reached $558.82; while the MEP dollar increased 0.3% to $511.30.

The increase happened over the course of the day although the Central Bank bought US$74 million in the official exchange market, marking its seventh consecutive closing with a positive balance. Agricultural exporters liquidated US$144 million with the new AR$340 preferential exchange rate, the “agricultural dollar” implemented by the government.

A variety of factors continues to push the exchange rate upwards — including a record 115.6% year-on-year inflation, record-low international reserves, investors dollarizing their portfolios in the run-up to the primary elections and the tensions after the IMF decided to postpone its second disbursement of the year to after the primary elections.

Inflation

June inflation was 6% according to the National Institute for Statistics and Census (INDEC, for its Spanish acronym), a 1.8% drop compared to last month’s index. However, consulting firms are not expecting it to keep decreasing. One of them, which participates in the Central Bank’s market expectation survey (REM, by its Spanish initials), told the Herald that most of them were calculating July’s inflation to be “closer to 7% than 6%.”

Last week, the Central Bank announced that it would postpone the publication date of the REM to August 15 — two days after this year’s presidential primaries and not before, as originally planned. Sources in consulting firms deem this move as a hint that the government is also expecting a higher inflation rate in July.

“In a context where the [expectation] is that the electoral results will be very tight, [the government] doesn’t want to give any kind of advantage,” a consulting firm that is part of the REM who asked to remain unnamed told the Herald.

Low international reserves and IMF tensions

Last Monday, amid tough negotiations with the IMF and a sharp drop in international reserves, the Argentine government implemented new taxes for imports of goods and services. The administration also granted a higher exchange rate — AR$340, against the AR$276.1 official “A3500” exchange rate — for some agricultural exports.

At the end of last week, the IMF announced that it would not make its June disbursement until after the primary elections, and only if the government complied with the Fund’s “sequential” program. The government decided to pay the IMF with yuan and by extending its currency swap with China and using a loan from the Development Bank of Latin America. After the payment, net international reserves are calculated at negative US$10 billion.