Moody's warns of falling dollar deposits after STEP elections

The withdrawal of dollar deposits after the WWTP continues to generate tension and warning signals in the market.

This time, the rating agency Moody's was warned against this situation. And he went further: "We hope that the decline in deposits will continue," he said.

The rating agency says however that "Most banks have great liquidity to withstand significant pressure on their deposits."

"Banks have been accumulating liquidity reserves since May 2018, due to the increased requirements set by the Central Bank and the sharp drop in lending," he said.

"The liquidity reserves are strong both in local currency and in foreign currency, even after the drop in deposits during the first week of post-election tensions," they said.

Moody's recalls that deposits have remained relatively stable since the crisis that erupted in May 2018. However, the surprising result of the primary elections has a decrease of 7.3%, or $ 2,400 million, in deposits within 6 days after the August 11th election.

This means that dollar deposits have decreased by about $ 400 million a day, on average, in the first six days after the election. This represents the largest nominal weekly decline in dollar deposits since the 2001-02 crisis and the strongest since 2014.

In contrast, Moody's records that local currency deposits have remained relatively stable, at least in nominal terms. "This is due to the fact that they are primarily transactional in nature and also to the increase in term deposit yields, themselves backed by bank investments in the Leliqs, which currently report 75% per annum. year, "they said. .

And they warn that the the decrease in pesos deposits during the week following the elections is mainly related to the usual seasonality.

"Term deposits have remained stable despite a slight decrease registered the day after the elections (August 12), returning to their pre-election level at the end of the week," they said.

According to Lacunza, "there is no reason" for the dollar to rise

For its part, the Minister of Finance, Hernán Lacunza, said that there was no reason for the dollar to continue to appreciate and said that the priority of its management will be to " stabilize "the exchange rate.

"There is no point in having reserves in the BCRA and a dollar like a kite," Lacunza said in statements to various media outlets.

He said: "It's one step at a time: stabilize, relieve and then project".

He stated that the dollar "made a correction after the STEP and there is no reason for another".

He stressed that the country risk does not decrease "because we do not know who will govern after December".

Lacunza said the election result was "a surprise for the market.And for us.The exchange rate has reached the highest level of the last twelve years, which is well above the equilibrium to middle term". enough to balance Argentina's trade and financial relations with the rest of the world ".

"There is no reason for competitiveness or capital flows to justify another correction, and any additional demand at this price is simply speculative or irrational," he said.

He felt that the "reserves are for that, in order to avoid an impulse that would be transferred to prices or an excessive, unnecessary and harmful volatility." The president said "take care of the Argentines" and in Argentina we know that during election periods there will be turbulence change as in 2015 and 2017 ".

Hold on country risk "will diminish as long as there is competition among candidates on some basic macroeconomic principles it must transcend a government: do not lie with statistics, take care of the budget surplus and this default is not an option ".

On the question of whether there will be more measures to encourage consumption, he felt that it was likely, insisting that the president ask him to "take care of the Argentines and that means the stability of the changes but also relieve the pockets ".

"Measurements should not be considered as specific announcements, but as integral, otherwise the shot may be exceeded.This could be worse if fiscal cost measures aggravate the deficit and jeopardize the situation. agreement with the IMF, "he said.

Lacunza said he did not see "any objective reasons why the Monetary Fund does not transfer the money from the next disbursement.We respect all the monetary and budgetary commitments we make."

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