The dollar touched the floor of the floating band and the Central Bank is preparing to intervene


For the first time since early October, when the Central Bank implemented the dollar flotation scheme between the bands, the US currency pierced the floor. allowed the entity to intervene in the foreign exchange market through purchases to recompose the value of the green ticket. On the other hand, the monetary authority must issue pesos that it will then have to absorb at the interest rate it pays in the daily Leliq auction.

This morning, when the foreign exchange market opens the dollar wholesale, will have a value of $ 37.30. The daily update scheme of floating exchange rate bands indicates that the Central Bank intervention zone begins when the dollar has a cost of less than US $ 37.31. Whereby technically, will be able to go to the market.

The agreement signed in October with the International Monetary Fund, which sets out the conditions under which the government can act in relation to the exchange rate, explained that in the event of dollar flight up or down the floating range, the monetary authority could sell (if it exceeded the ceiling) or buy (if drilled the floor) dollars.

Thus, in disruptive cases, the body headed by Guido Sandleris could go out to offer dollars and calm the demand, or acquire them, as he could do on Tuesday, to avoid a greater appreciation of the peso.

In December, the Central Bank's board of directors announced that its protocol, in the event of losses in dollars, would include purchases of up to $ 50 million per day, when the pact initialed with the IMF originally provided $ 150 million.

Consulted by, the monetary authority said they will act on the exchange rate "only if there is a market". It turns out that on Monday, when the dollar broke the flotation floor for a few minutes, exchange traders waited for a Central Bank appearance, which did not happen. "There was a very small operation alone, just down, but was not & together; & # 39; Marketplace ", opined the entity.

Close to Sandleris, it was always cautious to talk about the possibility of intervening in the dollar, since the purchase mechanism implies, in principle, that to make these acquisitions it would be necessary to print weights, which increase the size of the monetary base. Keeping the evolution of this indicator under control is at the heart of monetary policy.

Therefore, the board of the agency also established a ceiling of intervention in purchases that takes into account the monetary base. "The monetary expansion resulting from the purchase of dollars can not exceed 2% of the monetary base target for the month of January, this are $ 27 billion, which at an exchange rate of $ 37 would be something like $ 730 million"commented the director of EcoGo, Federico Furiase.

In order to contract or absorb these new pesos circulating in the eventual purchase of dollars, the Central Bank will have as its instrument the rate of Settlement Letters (Leliq), which it negotiates daily with financial entities. This Monday the body that runs Sandleris was able to drill the interest rate of 59% of these instruments, so that the monetary policy rate is at its lowest level since the end of August.

The Ministry of Finance, meanwhile, announced in an official presentation that during this first quarter will develop a mechanism by which goes on the market to sell the surplus dollarsas a result of the fact that debt maturities had higher-than-expected renewal levels and IMF remittances.

"The Treasury will have a surplus of dollars in 2019. The mechanism of conversion of the dollars necessary to cover expenses in pesos will be announced during the first quarter"highlighted Finance in the document that explains how the financial program of this year and 2020 will be.

In this way, the try to give certainty to investors about the need for dollars that the Argentine economy will have in the coming years, one of the sources of uncertainty that took the country risk to its record of Macri at the end of last year.

"The financial program for 2019 continues to show that there is no need to resort to financing in the international capital market," the presentation said. Likewise, he expects that, by 2020, IMF dollars and the debt he can borrow in the domestic market will be enough to cover the need for dollars.


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