There are movements in the futures market, the square that reflects expectations for the dollar. Analysts reveal what’s coming
The latest control measures for the dollar market implemented by the National Securities Commission (CNV) moved the dollar market and put the focus on the reserves of the Central Bank (BCRA), its firepower and devaluation expectations for after the elections.
As revealed to iProfesional market sources, in September, The BCRA once again took a position in the future dollar market for about US $ 2 billion to contain the expectation of devaluation and the implicit rates from December to March 2022 increased, from PASO until October 6, 6.5 percentage points on average.
Beyond the rise, the financial advisor and CEO of Interfinance.com.ar, Sergio Morales, points out that “the prices for December and March are still according to inflation levels, but there is always more turbulence in electoral times. ”
Market expectations for the post-election dollar are on the rise.
This market, which is traded mainly in the Rosario Forward Market (ROFEX), is thermometer of what investors expect to happen to the dollar in the coming months.
In this sense, the economist of Ecolatina Juan Pablo Albornoz explains that the intervention of the BCRA in that market has to do with the fact that “it is not safe for the rates implicit in ROFEX to rise since it not only impacts expectations, but also the real economy. ”
Thus, it exemplifies that a producer that has dollarized inputs is covered with a future contract of the risk that the dollar moves (and that its replacement cost becomes more expensive), when raising rates the cost of taking coverage increases and that ends up filtering to the price lists. So, both to calm expectations and to reduce the potential impact on inflation, the Central intervenes by selling the future dollar.
Until July inclusive, the Central had not intervened for three months. But, hand in hand with a more tense exchange market due to seasonal and electoral phenomena that were combined with greater pressures on financial dollars, there was they reheated the expectations devaluation and, in August, began to intervene, a trend that accelerated sharply in September.
The elections mark a pivotal moment in the expectations for the dollar in the market.
A curve split by the electoral calendar
On the other hand, Albornoz points out that “For months, the implicit rate curve of the official dollar futures (a thermometer expectations of market devaluation) has been ‘set’ in line with the electoral calendar“Thus, it details that there are two dissociated devaluation expectations between contracts that expire before the elections and those that expire after that time.
And this responds to the fact that the market believes in the Government’s determination not to devalue before November, but he does not believe that he will follow that same path after the elections. As summarized by the director of Amauta Inversiones, Regina Martínez Reikes, what reflects this behavior is the demand for coverage due to the fear of a possible exchange rate jump or an acceleration of the rate of devaluation (crawlibg peg) due to the shortage of reserves that it’s perceived.
The market analyst points out that the gap in dollar prices is the problem right now and that the measures that were taken to reinforce the stocks generate a greater expectation of devaluation. “You cannot have a dollar at 100 and another at 190 and try to control price and quantity in both markets and investors see this problem, that’s why they cover themselves, “he says.
However, from the Bull Market Broker Research team, they point out that what is seen in the futures market these days is that the BCRA is positioned mainly with contracts for October and November and they assure that “the market does not price a jump post-election exchange rate, but only one acceleration of the rhythm from depreciation of the peso“.
“That is the bet of the market today. And, probably, with importers out of the market, the purchase of coverage will accelerate,” they anticipate.
The market plays an arm wrestling against the economic team regarding expectations for the dollar.
What will happen to the future with the future dollar?
In this sense, they hope that the BCRA circular that limited the possibility of advance imports, especially of Small and Medium Enterprises (SMEs), will increase the demand for the future dollar and dollar linked.
For his part, Albornoz points out that, although the Central has room to continue intervening, without a roadmap and a horizon regarding the program with the International Monetary Fund (IMF), the devaluation pressures in this market will hardly subside. “The market and the Central are playing an arm wrestling: last year the Central won it, this year the result is not so clear“, he maintains.
It is difficult to know what will happen to the dollar after the elections. For now, a few days ago, within the framework of the New Money 2021 seminar, the president of the Central Bank, Miguel Ángel Pesce, said that the regulator has shown this year that “we have experience and success in exchange regulation” and assured that it has the capacity to protect reserves and take care of them for those who save, produce and invest..
He assured that they do not want there to be surprises in the exchange market and that, although in the years in which there are electoral processes, speculation about the exchange market always breaks out and in the third quarter of the year the exchange market tends to suffer stress because they stop entering the resources coming from the thick and fine crops, he was confident that “we are going to go through it successfully, as we went through last year.”
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