Argentina opens the door to a peso devaluation
The President of the Central Bank of Argentina, Miguel Pesce, announced to the Board that tomorrow he will open the exchange market with an offer of $76.95 per dollar, which represents a variation of 70 cents (0.918%) with respect to Thursday's closing. A new exchange policy regime, marked by the drop of the uniform daily micro-devaluations or "crawling peg" scheme and the adoption of a more volatile exchange rate, will begin.
"This decision is part of the new guidelines of the Monetary Policy that abandons uniform devaluations and introduces greater volatility, so it will not represent a pattern of behavior nor does it mean that this percentage or this nominal value will be devalued daily," clarified the Central Bank.
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As reported by LPO, in September the dollar rose 2.7% and in nine months it climbed 27.2%, always marking an even rhythm, but with the aggravating factor that sales in the last months accelerated -and since it restricted the purchase of dollars, the deposit outflow also accelerated, as recognized by Finance Minister Guzman on Thursday-. Under the new system, the dollar will be able to accelerate the rise in the short term without Pesce intervening to prevent it. In fact, in an unprecedented way, he announced that he himself will make it rise first thing tomorrow morning.
The presentation of the new Monetary Policy guidelines included other measures and the enunciation of several principles, in particular the maintenance of the multilateral real exchange rate -which would imply not letting the currency to devaluate excessively- and the need first to buy reserves with which to stop an excessive devaluation. In this way, volatility will be mostly upward.
In case the dollar has downward pressure, the Central Bank will be able to take advantage of it to buy reserves as it did in June and in case it rises, it will no longer try to contain it in the order of 2.7% per month or the 40 cents per week, thus opening the door to a more accelerated devaluation.
Among the other measures, the Central Bank announced a change in the rate of passive passes from 19% to 24% and an administration of the Leliqs stock so that sterilization will not become more expensive.
This measure and the creation by the Treasury of dollar-linked instruments to guarantee savers coverage against the risk of devaluation seeks to contain the demand for foreign currency.
New Yuan market
The Central Bank also announced the creation of a futures market with the MAE and Rofex to allow the purchase of the renminbi yuan against the Argentine peso for foreign trade operations. It will also open the possibility of entering into futures contracts denominated in yuan renminbi.
"This measure does not imply that physical yuans can be bought for hoarding nor will it permit the opening of bank accounts denominated in that currency. It is intended to facilitate the operation of foreign trade," the institution explained and detailed that it will use the yuan of the reserves to support this market and emphasized that " there are no plans to activate the currency swap signed with the People's Bank of China".
As LPO anticipated, access to the purchase of dollar savings will also be blocked for "the officials of the highest level of the national public administration up to the rank of undersecretaries or equivalent, national legislators (deputies and senators), and the directors of public banks including those of the BCRA".
This is the last of the measures of the new Monetary Policy, which is to give a free way to buy official dollars from those who bring in foreign dollars for Foreign Direct Investment "from the first year of the realization".