Investors are increasingly appearing Less interest in dollar portfolios. Even in recent days, the pace of unwinding dollar positions has accelerated: Exchange hedging The amount offered by the Treasury and the Central Bank to the market through various instruments collapsed by half compared to the extreme levels witnessed in the previous elections. Reflect that The market expects the continuation of the peace exchange And in the floating range chart.
Although significant recoveries in the official exchange rate have been observed in recent days, much of it has been explained by technical issues and the usual closing of trades at the end of the month, the effect of which has already begun to fade. In fact, calm has returned in the last hours, despite the low trading volume due to the holiday in the United States.
The aforementioned collapse in demand for dollar coverage is reflected, among other things, in the result Local debt tender Luis Caputo’s Treasury Department delivered last week: Investors renewed just under 7.8% of the outstanding US$4 billion in dollar bonds. That is, more than 92% of the amount due was not allocated to a similar instrument, which follows Exchange rate development.
The data indicate a significant lack of interest on the part of the market in protecting itself from possible increases in the exchange rate, which now seems unlikely in the short and medium term.. This trend contrasts with what was happening until just over a month ago, before the legislative elections on October 26, when investors demanded any type of dollar instruments and are now inclined to unwind those positions.
Dollar coverage collapses by 50%: how to continue?
Analyst Pedro Sciappa Serati estimates that the acquisition of financial instruments Exchange hedging Provided by the public sector (central bank and national treasury) to the private sector It fell by nearly US$7.5 billion in the past month.
In this way, exchange coverage collapsed from about US$15.3 billion the day before the October election, and was just under US$7.8 billion after the last debt tender.
The mentioned drainage coverage consists of: Treasury debt securities, such as dollar-linked and double-linked bonds, and central bank instruments, such as dollar-linked paid-up obligations and sales positions in the dollar futures market. After the recent unwinding, among these instruments, the ones that occupy the largest volume in investors’ portfolios are dollar-linked Treasuries and dollar futures positions.
The specialist estimates that dollar disarmament will continue in the coming weeks and will decline to levels similar to last summer’s levels, between $2.7 billion and $3.0 billion. That is, Forex hedging may fall to less than half of current levelsIt is already almost half of what was recorded before the October elections.
In this way, according to his analysis Accelerate disarmament to cover the exchange before the electionswhich would increase the exchange rate calm, resulting mainly from the seasonal increase in demand for the peso, the large inflow of foreign currency after the issuance of corporate and provincial debt bonds in foreign currency, the liquidation of the fixed crop of the agricultural export sector (wheat) and increased political certainty.
Less and less interest in the dollar: what the market is saying
Analysts had expected the exchange cover to be removed after Javier Miley’s landslide electoral victory in the legislative elections. Not only in peso-denominated instruments linked to the evolution of the exchange rate, such as those mentioned above, but also in Dollar bills and other types of assets After severe dollarization by investors and small savers for fear of a significant rise in prices.
In fact, in recent weeks, savers have been pulling back on this Dollar “bed”. Which they compiled in the months leading up to the October event. This offer, which according to analysts’ estimates will last for a longer period, contributes to the dynamics of relative stability with a downward tendency shown by the exchange rate, exceeding the recent rises due to technical problems associated with the closure of other positions.
Wise Capital analysts say so The market no longer expects a jump in the exchange rate. They highlight that the relative stability with which the dollar rate will operate “will be supported by the increased supply of foreign currencies in the official market, increased seasonal demand for the peso and the influx of dollars from corporate and provincial foreign currency debt issuances, which in November alone exceeded US$4 billion, the highest level of the Miley administration.”
Meanwhile, Clave Bursátil articles shed light on this There are still no definitions or indications of tangible progress regarding the repurchase of sovereign debt securities in dollars announced by the government. The process, if not implemented, will prevent foreign currency from entering the market. Although this will not necessarily mean a negative scenario for the exchange market, it will involve less supply and dynamics that could be less positive compared to what was expected a few weeks ago.