Dollar at $1,495 in banks: what are the four reasons behind this month’s rise

Behind the June rise is the game of lsupply and demand of pesos and dollars. From January to the end of May, there was an “oversupply” of financial dollars in the market, as a result of debt placements in the international market by provinces and companies. The dollars from the most dynamic sectors in the economy also helped: energy and agriculture. Demand, on the other hand, had been lurking in a context of rates in pesos higher than the expected depreciation.

The supply of dollars began to decrease this month. The placements of negotiable obligations (ON) by companies and provinces in the international market lost pace. The emissions boom that dominated the first quarter cooled. Less debt placed abroad means fewer dollars entering the local circuit.

The field also contributed less. The liquidation of the coarse harvest reached its peak between April and May. By June, agriculture had already poured most of its foreign currency into the market. With the bulk of the campaign liquidated, one of the legs that supported the supply of the first half of the year weakened.

On the other side of the counter, demand was reactivated. Three factors push at the same time. The first is the World effect. The World Cup boosted Argentine spending abroad. Tickets, hotels and card consumption in foreign currency added pressure on the banknote. Outbound tourism is, month after month, one of the main outlets for dollars.

The second is andl gift. The additional half annual salary that was collected in June left more pesos on the street. Part of those pesos went directly to the purchase of dollars for savings, a classic of every mid-year.

The third is the energy. Winter triggered gas and fuel imports. The sector that provides foreign currency in summer, demands it in the cold months. This seasonal shift reduces net supply to the market.

Added to the flows was a change of heart among investors. For months, the winning strategy was carry trade: position yourself in pesos to capture rates higher than the expected depreciation. As long as the dollar remained still, the bet paid off.

That scheme began to be dismantled in June. Faced with the expectation of a firmer exchange rate in the second half, several investors closed positions in pesos and migrated to dollar coverage. The movement feeds on itself: more demand for dollars puts pressure on the price, which validates the decision to hedge.

For the saver, the balance of the month is concrete: the dollar in the banks closed at $1,495 and the debate now turns to whether the second half of the year comes with more volatility.

An external factor was added to the local picture. In recent weeks the dollar has strengthened against the main currencies. The DXY index, which measures the currency against a basket of currencies, moved higher.

The effect is direct on the emerging ones. When the dollar appreciates globally, the region’s currencies lose ground in front of the bill. The real, the Chilean peso and other currencies in the region accompanied the movement. The Argentine peso was not left out of this trend.

For the local market, this operates as a pressure floor. Even without changes in internal flows, a stronger dollar in the world puts an upward bias on the price.