The five reasons behind the rise of the blue dollar after the agreement with the IMF

After two wheels down, The blue dollar resumed its upward momentum this Tuesday and is up ten pesos. So it reached $560 and reached a new record nominal. Altough agreement with the IMFpre-election dollarization continues, amid widespread economic instability.

Although last Friday Argentina managed to close the technical agreement with the IMF, which clears up the uncertainty until the October elections – as the next review will not take place until November – and creates disbursement of US$7.5 billion this month, the parallel dollar finds no peace. Neither did financials, whose prices rose across all segments on Tuesday.

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The market’s reaction to the consultation with the IMF has been lukewarm since Friday. even though the ties and Actions They showed improvements, the blue dollar barely lost ground and financial prices rose in recent days. Calm does not reach the foreign exchange market and the reasons they are varied.

The agreement with the IMF, just a bridge to October

For analysts, the agreement announced with the multilateral organization is only a facade to give air to the government at election time, but it does not solve the fundamental question. Among other things, because the proposed goals will be very difficult to achieve by Argentina.

According C&T Financial Advisorsthe agreement “avoid crisis risk due to the collapse of reserves, but the delicate financial situation remains.’

Reserves in critical condition

This Monday $2.7 billion was paid to the IMF, $1.7 billion of which came directly from Central Bank reserves. So, the agency’s coffers closed at US$24,032 million, the lowest price in 17 years. In terms grandchildrenprivate calculations -for example, of Consultation– they are already talking about reservations losses of up to $8 billion.

To make matters worse, the payment was made by triggering the second tranche of the swap with China and taking on new debt with the CAF, since IMF disbursements will not arrive until the third week of August.

Pre-election uncertainty

Less than two weeks before the PASO 2023 elections, the concern of Argentines is dollarize your savings until the issue is resolved uncertainty electoral. For this reason, as July wages are deposited, those with a surplus will certainly choose to try to dollarize it.

Read also: Dollar revenue from the field rebounded more than 20% in the past month, but remains 42% below 2022

After bad experiences with surveys and with an election that has candidates with radical proposals – such as e.g Javier Miley– and the Minister of Economy himself among the competitors, the market mantra seems to be “wait and see what happens”.

inflation is overheating

After the falls in May and June, analysts are already suggesting that inflation will overheat in the coming months. Among other things, because of bounce of the blue dollar and on the measures Sergio Massa agreed with the IMF to try to stop the drain on reserves.

excess weight

As demand for dollars remains high, that of the peso continues to be low. The currency issue – which according to the IMF would no longer be necessary to meet the goals of the new agreement – creates a large peso in the economy where people and companies prefer to “get rid of” quickly in the face of inflation expectations.

despite the positive real fixed interest ratesavers choose don’t leave all your savings in local currency and they go out to dollarize them. This pressure is felt in the blue dollar and financial prices.