He dollar Libre has seen a significant drop in recent months, recording a 30% decline from its peak of $1,500 in July. Currently, the free dollar is trading at approximately $1,055, getting considerably closer to the official exchange rate and reducing the gap to less than 3%.
This situation has led the economic team to accelerate the implementation of “phase 2” of the program, which basically sets the broad monetary base. To stop the collapse of dollar free, the Central Bank of the Argentine Republic (BCRA) decided to reduce interest rates.
The reference rate went from 35% to 32%, with the objective of loosening the demand for pesos and providing a guarantee to the markets regarding the decision not to issue pesos. This measure was taken in a context where seasonality plays an important role.
Companies need to accumulate pesos to pay the half bonus before the holidays and families sell dollars to cover current expenses. The exchange market has seen a large number of people willing to sell dollars, while very few are interested in buying, creating a ratio of 10 to 1.
Fountain: Dollar Today.
In addition, companies and investors take advantage of the drop in the exchange rate to carry out “carry trade” operations, where they obtain profits in hard currency due to attractive interest rates in pesos.
Despite the reduction in the exchange gap, the government has decided not to rush the exit from the stocks and the unification of the dollar, betting on an endogenous polarization that allows the dollar circulate more in a context of lack of pesos. However, this strategy still faces challenges and is a project that has little correlation in current reality.
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All eyes are now on the measures that could be adopted to put a floor on the exchange rate and avoid an exaggerated fall due to exchange rate obstacles. One of the obvious measures would be an additional reduction in interest rates, which the BCRA has already begun to implement.
The fall of dollar free and the reduction of interest rates by the government are measures that seek to stabilize the economy and avoid a further slowdown. This Friday, December 6, the blue dollar is trading at $1035 for purchase and $1055 for sale. Meanwhile, the official dollar is trading at $993 for purchase and $1,033 for sale.
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