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The dollar reached 46.68 pesos Monday and jumped 79 cents. Uncertainty in the domestic market in recent weeks has been reinforced by international tensions. The financial climate of the world is starting to become less and less optimistic and to generate new pressures on the currencies for the Argentineans. China has devalued its currency. The price of the yuan has recorded the most depreciated value since 2008. This measure caused a black Monday for world trade, with losses of nearly 4%. Country risk increased by 8.7% (72 units) and further increased to 904 points. International reserves fell sharply by more than $ 500 million that day.
Argentina is one of the world's most vulnerable economies in the face of external crises and the effect is reinforced by the devaluation of the Chinese currency. The Central Bank saves nearly a third of its international reserves in yuan (the equivalent of $ 20 billion). On Monday, the exchange rate rose 1.7% and closed near the record high of 46.90 pesos on April 26th. This increase is similar to that recorded in the major economies of the region. The Mexican peso and the Brazilian real rose between 1 and 2% earlier this week.
In the world, the price of financial badets has plummeted. Stock markets in developed countries recorded significant falls. In the United States, the victims of the giants of technology have distinguished themselves. Apple's share lost 5.2% on the day, which equates to a loss of $ 45 billion. In China, the stock market closed with reds of 1.6% and in emerging countries, the average decline was 3.7%. Investment funds have sought refuge in safe badets. Gold posted a new price spike of $ 1,468 an ounce, the highest value of the last six years.
Will the dollar continue to rise?
In the city, they say that this week will be a source of strong financial tensions for the peso. It is not excluded that the central intervenes with reservations to try to contain new jumps in the exchange rate a few days after the elections. The monetary authority has remained in the wait and until now, it bet on the strategy of selling the future dollars and raise the Leliq interest rate: this Monday, he went from 61.00 to 61.59%. Reserves closed at $ 67.036 million with a fall of $ 519 million. The consultants consider that the mood change of the international financial markets is not temporary and that the new phases of devaluation of the emerging countries could continue.
What is happening in the world?
In the last two weeks, two episodes have created financial pressures. The first was the reduction of the rate of interest of the Federal Reserve. The tariff adjustment was below market expectations and the response was not good. Capital cities have not accelerated their entry into emerging economies and have begun to emerge.
The second element was the return of the trade war between the United States and China. President Trump imposed new tariffs on the import of Chinese products last week. The Asian giant's response came on Monday with the 1.5% devaluation of the currency to bring it above 7 yuan to the dollar. The trade war is now beginning to turn into a currency war.
What to expect for Argentina?
The new international scenario generates a double problem for the country. First, capital outflows from emerging countries to developed economies. This is the natural response of investment funds to the uncertainty of the world (prospects of recession in the United States, lack of certainty about the commercial struggle between the two world trading powers and the new currency war).
Two: the central bank accumulates a significant share of its international reserves in yuan (loans from the Chinese monetary authority in the form of swap). As the devaluation of the Chinese currency accelerates, the reserves diminish. The moment is not the best to start losing money. The proximity of the elections stimulates demand for dollars in the domestic market and puts pressure on the exchange rate. The fall in reserves decreases the firepower of the plant to contain further devaluations.
Will the plant start selling currencies?
In the market, they believe that the international financial climate could accelerate the decision of the entity in charge of Sandleris to intervene on the foreign exchange market. For the moment, it operated on futures markets without offering cash dollars. The most influential consultants and calls from the city of Buenos Aires said that the plant had $ 6,000 million to try to control the exchange rate. You can use them in sales close to 250 million a day. The IMF does not approve other amounts.
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