Dollar Reserves Vs Dollar Rates

[Redbeanz]

With the [dollar] reserves being drawn down to such a precariously low level, what simultaneous but opposing factors are causing the parallel dollar rate to drop? It seems too early for the rate to be affected by optimism over a possible Macri win, in the face of the very real, not just possible, lack of hard currency in the reserves. This week's new tightening of dollar transfer restrictions is clearly aimed at preventing further dollar reserve drops, but at the same time, that kind of move usually adds to fears and makes more people seek the security of the dollar. Indeed, the official rate edged up this week, while the blue rate fell. I would love to understand this whole dynamic.

Can anyone explain in simple terms?

 

[Rich One]

Dollar Futures Sales by Central Bank at $10,80 for 2016 makes it a more attractive option...!! than Blue dollar ?

https://translate.go...565&prev=search

 

[sesamosinsal]

I think you're exaggerating the drop in price? The informal rate hit a maximum of 16.11 on October 19. It's now at 15.78, according to La Nación. It's a 2 percent price drop, which is hardly significant.

 

[Redbeanz]

I think you're exaggerating the drop in price? The informal rate hit a maximum of 16.11 on October 19. It's now at 15.78, according to La Nación. It's a 2 percent price drop, which is hardly significant.

Definitely didn't mean to imply that the exchange rate was going through the floor. Did I imply that? I am less interested in the 2 per cent drop than in the fact that there is a drop rather than a rise, given the indicators that I am seeing. I really would like to learn, rather than be dismissed for exaggerating. Would like to understand other indicators of which I am ignorant, and would like to learn about these from someone on the forum who has real knowledge rather than just opinion.

My question was intended to ask simply this: with all the indicators I'm looking at, pointing in the other direction, is there some explanation about why the parallel rate dropped from16.11 to 15.75 between Oct 19 and Oct 30 ?
No Armageddon thoughts intended; rather, asking if anyone with more insight than I have, could venture an opinion on why the 11-day trend hasn't been in the opposite direction.

 

[thorsten]

In smaller markets, fluctuations like this are not uncommon. It often requires just a few bigger transactions on the buyer or seller side to change the rate in one or the other direction.

 

[Redbeanz]

So no larger indicators pointing in either direction over the relatively short term, for instance, relating to the balotaje? I am really interested in this, and appreciate your thoughts.

 

[thorsten]

Basically those expectations also influence the price. But the problem is as follows: assume after the election results, the market would see the price 2% higher. At the same time, no importer needs larger amounts of US$, while a lot of people want to buy alfajores and milanesas so they sell some savings in US$. The price won't be 2% higher in the end.
The cuevas basically don't care if a price is "fair", i.e., over- or undervalued - they just match supply and demand and earn by charging commission on each transaction. So no matter if they think the "real value" should be 17 or 15, if the supply and demand is such that it matches at 16, they just sell US$ for 16.50 and buy them for 15.50. Hence, there is too much noice (variance) in the short-term development of the exchange rates to make clear conclusions about one of the factors.

 

[sesamosinsal]

Definitely didn't mean to imply that the exchange rate was going through the floor. Did I imply that? I am less interested in the 2 per cent drop than in the fact that there is a drop rather than a rise, given the indicators that I am seeing. I really would like to learn, rather than be dismissed for exaggerating. Would like to understand other indicators of which I am ignorant, and would like to learn about these from someone on the forum who has real knowledge rather than just opinion.

Sorry, it was not my intention to dismiss your question or anything of the sort.

As thorsten notes, the market is small, but it's still a market. It's still guided by the laws of supply and demand. The reason why I said that a 2 percent drop is irrelevant is because most likely it's the market trying to accommodate a short-term excess of dollars.

 

[Ries]

foreign exchange, like the stock market, is psuedo science- that is, there will always be somebody who claims its predictable and follows rules, but, in reality, its gambling, whose ups and downs are due to mass hysteria and the emotional herd mentality of crowds.

That is to say, it goes up and down based on rumors, false reports, emotions, crystal ball predictions, and mysterious itches in the underpants.

To try and assign rationality to it is a waste of time.

Certainly, some people, especially overseas, read ridiculously simplified explantations of the elections, and bought or sold accordingly, but, my main take on the recent drop, and its timing, is, its meaningless. 2% rises and falls happen all the time- blame the weather, the pope, bunions, or Victoria X.

 

[thorsten]

Ries, if those markets follow based on herd mentality of crowds, then this is a rule and those able to predict the crowd more accurately will win in the long-term