Parallel dollar exchange rates increase by up to 10% in two days

The blue dollar rate is only 20 pesos away from its all-time high following relative calm

Hundred dollar bill. Money isolated on white background. American cash

After months of relative calm, the informal U.S. dollar rate, or “blue dollar,” jumped by 9.8% this week. The blue-chip swap rate, a financial rate used in bond exchanges known as contado con liqui in Spanish, increased by 8.3% in the same period.

With the jump, the “blue dollar” is at AR$1,230 per unit, close to its all-time high of AR$1,250 in January. The blue-chip swap rate is AR$1198. Since a steep 54% devaluation in December, the government has kept the crawling peg (the monthly peso devaluation of the official exchange rate) at 2%.

Analysts told the Herald told the recent decreases in the Central Bank’s benchmark interest rate are behind the rise in the greenback.

Last week, the Central Bank decreased the benchmark annual interest rate for the sixth time since President Javier Milei took office. The current nominal rate is 40% whereas the effective rate is 49.1%. Conversely, interannual inflation soared to 289% in April, according to the National Institute for Statistics and Census (INDEC, by its Spanish acronym).

“[The jump] has to do with the rate decrease and the dismantling of investments in pesos that return to dollars,” Gustavo Quintana, an analyst and broker for PR Corredores de Cambio, told the Herald. He said that people are abandoning fixed-term deposits in pesos.

Pablo Repetto, head of research at brokerage firm Aurum, agreed. “It is logical for such an abrupt drop in rates to produce a higher demand for U.S. dollars since their rates have been very stable for a long time,” the analyst said.

“There was a wide spread between the peso rate and the devaluation rate,” Repetto added. “It was strange that the dollar rates remained unchanged for such a long time.”

Quintana said that the development of mortgage loans promoted by the government could add extra pressure to the demand for U.S. dollars, as real estate in Argentina is sold in U.S. dollars.

Businesspeople who export their production have insisted that the government devalue the official exchange rate, now at AR$889.25 in the wholesale market. On Tuesday, Economy Minister Luis Caputo rejected that possibility and insisted that they would maintain the 2% monthly crawling peg.

“We have to gain competitiveness by lowering taxes, not by devaluating,” he said at the 41° annual congress of the Argentine Institute of Finance Executives (IAEF, by its Spanish acronym). “Devaluation is a mistake that has always been made.”

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