Possible drop in Fed rates: a tail "tornado" that would favor the entry of dollars and a lower country risk

A tail "tornado". This is how economic and financial badysts describe the effect of a possible reduction in exchange rates.
Federal Reserve United States (Fed), which would be announced in a few hours. The decline, which would lose the dollar to the dollar, would have an effect on the exchange rate, bonds, stocks, country risk and even local commodities, such as soybeans.

"Whenever the Fed raised its rates, it led to capital outflows from emerging countries, investors preferred a low and safe rate, above a high but risky rate in an emerging market. Argentina could be worse in the context of the current crisis, "says Martín Kalos, Chief Economist at EPyCA Consultores.

The contracara, in this case, would constitute an incentive for the entry of capital into Argentina. "It's harder to read in an economy like ours, but as long as the Central Bank retains positive and high real interest rates, more capital may be encouraged to look for it," he said. he. A first direct effect would therefore be greater stabilization of the exchange rate (or at least a lower devaluation).

In the event that the Fed finally decides to lower the rates, the political uncertainty will not help much in this context: "The effect would lose its relevance if we compare it, for example, with the impact of evolution and uncertainty about the upcoming elections. Now, for investors, PSO surveys are a much more relevant variable for choosing (or not) local badets, "said Lorena Giorgio, Senior Economist at EconViews.

To see how the exchange rate is changing, says the economist, it is essential to know what will happen after the announcement today. "The market anticipates not only a possible rate cut, but also the pursuit of a more flexible Fed policy, which would also imply a reduction in September." For this reason, the press release of the entity about its possible action, "says Giorgio.

Commodities, bonds and country risk: potential beneficiaries

According to Kalos, productive investment would have no significant effect, it hardly exists, nor the cost of private debt. "This will have an impact on the interest rates to which the Argentine government is financed," he said.

Commodities will be one of the beneficiaries, says Mariano Sárdans, CEO of FDI in wealth management. The specialist points out that there is a "rate war" between the European Central Bank and the Fed which leads to "follow" the cuts made by each of the entities so that their currencies are not delayed and, thus, do not lose not your competitiveness.

"This is an extreme tornado for countries like ours.In recent weeks, the price of commodities has increased: they are trading against hard currencies and, as the euro or the dollar s & rsquo; The price of soybeans or oil is increasing As a result, we are getting more currency, "says Sárdans.This brings the weight" to be relatively appreciated. "The badyst says that" we are getting more money. " there will always be a devaluation, but at a slower rate than inflation.

Bonds, stocks and country risk would also be affected. "In a world of zero rates or negative rates, all that is positive is considered very good, which is why Argentine bonds have been rising for weeks," he said.

"If the Argentine bonds go up, the country risk decreases and, therefore, the shares are also more beautiful and worth more.It is very virtuous and this is already happening," said Sárdans.