How long does the dollar hold? | Economists evaluate …

The dollar is once again a concern in the city of Buenos Aires. This time, it is not the rise that upsets the nerves of investors, but the sustained decline in price in recent weeks. The currency has ended Friday around 43 pesos in the main exchange houses of the market. Economists consulted by the newspaper said the 11% drop in the dollar's price in two months is starting to generate risks. They said it was a double-edged sword because it can help reduce inflationary pressures and reactivate consumption in the short term, but it reinforces the hope of a devaluation by the end. of the year. They ensured that repeating the financial cycling experience was an explosive strategy. "The fall of the currency in recent weeks can be transitory and explain by the restriction of liquidity of the companies (need to sell dollars to make the payment of bonuses), the auction of the liquidation of the Harvest and auction of the 60 million Treasury, "said former director of research at the Central Bank, Jorge Carrera. He argued that this poses a risk in the short term. "Once these transitional factors are completed, the rise of the currency can heighten investors' nervousness and compel them to draw up reserves with reckless interventions on the foreign exchange market." Changing expectations is another medium-term risk of appreciation. "Maintaining this real parity for several months is not free, inflationary inertia remains high, and investors' expectations are changing.The type of change that has taken place has led many investors to believe that money is cheap. that badumptions will appear that before or after the elections, there will be a correction.The feeling of a cheap dollar reinforces the conditions of a new bullfighting, "said Carrera. The new cycle of the financial cycle (selling short-term dollars to invest in high peso interest rates while the exchange rate remains calm) is becoming a central concern for economists of all currents. They mention that last year 's experience clearly shows that capital coming from abroad does not disappear gradually. The day you decide to leave the internal market, all the other funds start to explode. This situation does not depend on politics or elections. The moment in which the capitalists plan their withdrawal is impossible to anticipate (in 2018, no consultant had planned the disarmament of Lebac). The exit from the domestic market of carry-trade dollars – the so-called financiers – is a permanent threat in an economy where the process of dollarization of the private sector has not been slowed down. "Gross foreign exchange purchases from individuals remain at very high levels, and this demand continues to grow as the exchange rate begins to show appreciation, as shown in the final quarter of the balance of payments data." said Martin Burgos, economist at the Cultural Center for Cooperation. He badured that the appreciation begins to liquefy the wealth effect of the last few months (increase in the sale of foreign currency). "The stability of the dollar and these levels of inflation (almost 60% over one year) encourage the net purchase of foreign currencies and even the growth of certain imports.The appreciation can generate some reactivation in the short run. term, but it is a double-edged sword in this almost unrestricted pattern of financial and commercial openness, which creates new pressure on the external accounts: the main weak point of our economy. "Researcher at the Center for Cultural Cooperation stated that control of the capital account would be indispensable for the team charged with managing the economy next year. "The big challenge is to know what to do to buy currencies from the Argentineans.The subject often seems taboo.Nobody wants to talk about it.You can not speak.But steps must be taken because these leakage levels are not viable for anybody. internal market, "he said.