Milei’s FX gambit sparks sharpest demand for dollars since 2019

[MilHojas]

Milei’s FX gambit sparks sharpest demand for dollars since 2019

Demand for dollars in Argentina at its highest since 2019 after President Javier Milei all but eliminated foreign-exchange restrictions.

www.batimes.com.ar

About a million Argentines purchased a net total of US$1.9 billion worth of greenbacks in April, according to Central Bank data. That’s up sharply from March, when 34,000 people bought just US$6 million in US currency.

 

[LuckyLuke]

"About a million Argentines purchased a net total of US$1.9 billion worth of greenbacks in April, according to Central Bank data.

...About half of the greenbacks stayed within Argentina’s banking system as deposits increased by US$1 billion, according to the central bank report released late Friday."

In other words the other half went back under the mattress. Is 50% banked an improvement? One has to ask at the end of the day just what exactly is being accomplished here. Taking money out of foreign reserves to allow more dollars in circulation? Why? To dollarize the economy? Are any of these dollars circulating beyond real estate and a temporary store of value?

 

[FrankPintor]

"About a million Argentines purchased a net total of US$1.9 billion worth of greenbacks in April, according to Central Bank data.

...About half of the greenbacks stayed within Argentina’s banking system as deposits increased by US$1 billion, according to the central bank report released late Friday."

In other words the other half went back under the mattress. Is 50% banked an improvement? One has to ask at the end of the day just what exactly is being accomplished here. Taking money out of foreign reserves to allow more dollars in circulation? Why? To dollarize the economy? Are any of these dollars circulating beyond real estate and a temporary store of value?

And another question, to add to all of yours, if there is high demand for the Dollar, why isn't the rate going up (I see the official rate did today, but the blue fell.

 

[LuckyLuke]

And another question, to add to all of yours, if there is high demand for the Dollar, why isn't the rate going up (I see the official rate did today, but the blue fell.

It's a complicated question...my first answer would be a shortage of pesos is driving up the value relative to the dollar.

Think of it this way, there are less pesos in circulation today then before (expired peso denominated instruments, no printing from the government, selling pesos for foreign currencies, etc.).

The quantity of pesos in circulation vs the quantity of dollars in circulation is at an equilibrium of today' value (MEP rate).

If the quantity of pesos available shrinks further, it could strengthen further against the dollar.

If the quantity of dollars shrink further, it could strengthen further against the peso.

The government "motosierra" is trying to shrink pesos faster than dollars to avoid the value going up.

 

[LuckyLuke]

What I'll never understand is why Argentines are so focused on how local politics affect ARS vs USD, that they fail to see how US politics affect USD vs Euro.

So myopically are they watching the dollar, that they missed this one:

 

[retiredbanker]

Markets going crazy here today; peso dropping like a hot knife thru butter.

 

[SlowWalker]

What I'll never understand is why Argentines are so focused on how local politics affect ARS vs USD, that they fail to see how US politics affect USD vs Euro.

So myopically are they watching the dollar, that they missed this one:

View attachment 10430

Agree. Part of the reason the ARS:USD has stabilized is because of the loss in value of the USD.
The USD is ~12% weaker vs the Euro from January to know, which would be another 140 ARS:USD.

 

[dlish]

I wish the Blue would follow