With uncertainty at its peak, dollars hit new records and the gap widened to over 50%

The start of phase two of the Government’s economic plan was received with distrust by the market, which reacted with increases in alternative dollars, a rise in country risk and falls in bonds and stocks.

On the first business day after the press conference held last Friday by Minister Luis Caputo and the president of the Central Bank Santiago Bausili, The parallel dollars broke the ceiling of 1,400 pesos and marked the highest nominal prices reached so far.

First it was the blue one, which climbed 40 pesos in one day and ended in $ 1.405. But at the close of the round, financial dollars took the lead: the cash with liquidity reached $ 1.412,5 and the MEP, to $ 1.413. On the first day of the second semester, Financial rates rose 4.6%, more than double the increase expected by the official rate this month.

Even so, all of them are still losing a lot compared to prices. The cash with liquidation rose 45% in the year and the blue 40%, while Inflation in the first half of the year was around 80%.

With the new jump in parallel dollars, The exchange rate gap widened above 50%the highest point since last January. In fact, the gap reached 55% for financial dollars. For the market, the gap above 40% sets off alarm bells about exchange rate stability.

This gap, which had exceeded 100% in the second half of the year last year, had been reduced to 21% in April, amid the nap of the alternative dollars, which had been calm between February and April.

That nap began to end as the Central Bank lowered the reference interest rate, which made placements in pesos less attractive and led investors to bet on the US currency again, either through the purchase of banknotes or bonds linked to the dollar.

This was reinforced by the difficulties that the Central Bank had in June to accumulate reserves. Last month ended with a negative balance of US$ 85 million, amid the increased incidence of payments to importers.

This paralysis in purchases has revived uncertainty in the market, which is seeing it becoming more difficult each week for the Government to sustain the 2% adjustment in the official exchange rate. This Monday, the Central bought US$ 50 million, a positive sign that failed to change the market’s mood.

With this stone in their shoe, operators were left waiting in anticipation after the Caputo and Bausili conference on Friday, in which they ratified the 2% monthly crawling peg and the dollar blend at 80/20 for exporters, announced a debt swap for banks, and postponed the lifting of the currency controls without a certain date.

The market was left wanting more and reacted with increases in dollars and falls in assets. The shares of Argentine banks listed in New York sank up to 9% and dragged down the entire ADR panel. The Buenos Aires stock market was also affected, with the Merval losing 1%.

The bad streak also affected bonds, which fell by up to 3%, leading to country risk 1513 basis points, an advance of 4.3% on the day and at the same time the highest level since March.

From Portfolio Personal Investments (PPI) they pointed out that “The conference left a bittersweet taste. The market was expecting exchange rate announcements rather than monetary ones.

In addition, “they stressed that this second stage of the economic plan does not have an estimated implementation period, so The lifting of the restrictions, which will take place in a third stage, has no set start date.”

“The market is wondering what the new exchange rate scheme will be in a context where the Central Bank ended June with a negative balance of US$ 85 million, This being the first month in Milei’s administration in which the BCRA sold reserves,” PPI added.

An example of the uncertainty that is growing in the market is that investors are moving away from peso-denominated investments that adjust for inflation (CER) and are increasing their exposure to securities tied to the dollar. In this context, PPI detailed that in the last week the Mutual Funds (FCI) industry was invested in funds that invest in dollar-linked strategies exhibiting net subscriptions of redemptions by $ 78.926 million between Wednesday and Friday.