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Strong Decline in the Dollar Following Announcement of New Economic Policy

The closing market price for the dollar finished at $30.68 today.

By | [email protected] | August 14, 2018 5:05pm

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After a volatile day, the has dollar declined. According to the retail average prepared by the Central Bank, the public closing market price for the dollar sits at $30.38, with some banks listing it at $30.80. Compared to the $30.68 of the previous day, the peso appreciated 30 cents. In Banco Nación, which usually has the lowest market price, closed at $30.05 (40 cents below its closing price yesterday).

The US currency wholesale price sits at AR $29.71, which is 0.73 percent below its closing marketing price yesterday at AR $29.93. At the beginning of the day, the dollar registered a significant drop compared to the peso, in line with what happened with other currencies of emerging countries, but that trend slowed down as the day progressed.

By midday, the US currency was selling at $29.40 at wholesale price, 33 cents less than yesterday’s record. But after 2 PM, when the Central Bank auctioned US $200 million in reserves, the dollar began to rise.

The currencies in Latin American have also appreciated, so that the lower pressure on the local currency is partly due to the international context, with dollar declining in Brazil (0.07 percent) and Mexico (0.67 percent). The trends however differ in Chile, with its currency depreciating by 0.24 percent.

As of today, the dollar index, which measures the value of the currency in relation to a basket of foreign currencies such as the yen and the euro, had a marginal decline of 0.01 percent.

Image result for the dollar in Argentina

(Photo via Daily Mail)

Additionally, after three weeks of the Turkish lira losing value against the US dollar, it recovered by 6 percent due to active measures from the Turkish Central Bank.

There has also been increasing pressure on the dollar as a result of the domino effect of the Turkish-American crisis, which promoted the risk aversion of emerging economies.

To avoid Argentina’s being dragged into the Turkish crisis, the Central Bank, chaired by Luis Caputo announced yesterday three measures to stop the exchange rate from getting out of hand.

The benchmark for interest rates went from 40 percent to 45 percent. Furthermore, at 2 PM today the Central Bank auctioned reserves of US $500 million to try and release the pressure on the dollar.

The Central Bank reported that US $200 million were sold at an average of $29.40. They sold fewer dollars than anticipated because “the demand at market price was lower than expected,” the monetary entity said in a statement.

There was also a plan launched today that sees the progressive and total cancellation of the Lebac stocks, which function as loans to the Central Bank, and are often used by the government as an influx of funds to restore momentary calm to tumultuous currency markets.

At the beginning of the day, Argentine stocks were in green but as the day went on began to show a more mixed trend. At 2 PM in New York, the main increases were for IRSA (5.42 percent), Loma Negra (5.32 percent) and Telecom (3.46 percent). Meanwhile, Ternium (-2.03 percent), Cresud (-0.96 percent) and Banco Supervielle (-0.20 percent) all declined.

The Merval increased by 0.59 percent and the shares that earn the most are those of Cablevisión (11.07 percent), Ternium (5.93 percent) and Distribuidora de Gas Cuyana (5.66 percent).