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Currency bands Chau – 29/04/2019



Do something It was a statement led by the makrists themselves. And the government did something or more than something: Open with Cambiemos partners, went to try to influence mass consumption prices and weekend he got the fund to release the intervention corset with the dollar. There is a lot to do for the government.

Last week's turbulence has clearly shown what has long been clear: the central bank I couldn't face the exchange pressure when my hands were tightly tied. Tied up with a commitment not to intervene or intervene in the market with strong restrictions that the government adopted last June before the Monetary Fund when the night came.

Negotiations and green light from IMF agents, from now on BCRA has free or almost free hands to prevent the dollar from soaring and launching everything that fires when the dollar rises, starting with prices. You can do things you couldn't do before, for example, sell more dollars, even if the price is below the ceiling agreed with the fund. And you can also sell more dollars when the price exceeds this ceiling. There is a key in selling more dollars.

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And he can do more things than the two things. In one case, he could have previously sold up to $ 60 million in two daily operations. Now, "quantity and frequency will depend on momentum dynamics"In the second case, before I could sell up to 175 million and. T now you can sell up to 250 million, In summary: "It can take further action to prevent excessive volatility episodes." All quotes are phrases from central bank communiqué.

So much flexibility together means that the currency band ceiling has disappeared. And because BCRA was not and is not obliged to buy when the dollar is under the floor, the sum of the shares gives the currency bands disappear. In other words, you can sell above the roof and you can't buy under the floor.

Most analysts thought that if nothing changed, there would be new cimbronazos. And worse, they picked up unpredictable risks that coexisted with the dollar to jump from here to the October elections. Six months or twenty-five weeks, according to the consumer's taste.

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The fact that the central bank was able to use its firepower before it was too late was evident The dollar began to subside 3.2% to $ 45.50. Slightly with the dollar it also reduced the country's risk, What influences trust, but it's no longer just in government, but in what might come.

The government surrendered and the Fund also advanced. What is the merit of politics if you can say merit: negotiating reality more than theories. Reality denied these manuals. As it is well known that a day or a few days are few in the life of the markets, the key is to enter a trusted and extended exchange rate zone. The predecessors of the peace exchange zones abound, but they are transient and therefore very little credible.


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