Banking What is going on with the Blue dollar? Why is it going down?

[Blockchain]

I try to just use my foreign credit cards that don't have transaction fees. It can be a hassle to wait in line, go to WU, cueva. I always have to have some cash but I try to eliminate it as much as possible.

I keep thinking the peso has to devalue. I know Argentina is improving but the peso value seems out of whack to me. It is strange to me that everyone admits the peso is too high. Everyone! My banker friends, my accountant friends, my lawyer friends. Everyone! I asked them what the fair value is and most people are saying at least 1500 to 1600. But they say until the cepo happens it won't go down.

I don't understand the dynamics but just hoping it comes down and the blue dollar gets stronger.

Read some articles that say the same thing that it is strong but that it can stay like this a while.

Inflation, dollar, consumption: here’s what Argentina’s consultancies expect in 2025 - Buenos Aires Herald

Analysts expect the economy to grow even as inflation cools — but the exchange rate is a significant incognito

buenosairesherald.com

Last year seemed like it was too weak but now it seems too strong. Poor people that earn pesos. I don't really have much sympathy for expats or foreigners making dollars. But can't imagine making peso incomes there. Even with the peso stronger these prices in dollars are tough. Read this today. I wonder at what point the Central Bank starts worrying or will admit it is too strong? I saw Milei mentioned it a few weeks ago.

Hurt by high prices, Argentines seek cheaper goods abroad

In the shopping malls of the Chilean capital and the famous beaches of Brazil, Argentines are looking to snap up various goods, from clothes to...

www.dailysabah.com

 

[Ron]

The eternal tango between the peso and the dollar. As someone who’s seen a few economic cycles, I can tell you this: there’s no such thing as a ‘perfect’ exchange rate, especially in Argentina. When the peso is weak, it’s a disaster for savers and those who rely on imports. When the peso is strong, it crushes exports and makes life impossible for those earning in pesos.

The Central Bank handling this balance? They’ll probably only admit the peso is too strong when exporters start shouting loud enough or when reserves hit a critical level. That Milei mentioned it is interesting, but one thing is rhetoric and another, action. We’ll have to see if his team has a real plan or if it’s just more noise. In the meantime, for those earning in pesos… hang on tight. It’s going to be a rollercoaster.

 

[Vero]

The eternal tango between the peso and the dollar. As someone who’s seen a few economic cycles, I can tell you this: there’s no such thing as a ‘perfect’ exchange rate, especially in Argentina. When the peso is weak, it’s a disaster for savers and those who rely on imports. When the peso is strong, it crushes exports and makes life impossible for those earning in pesos.

The Central Bank handling this balance? They’ll probably only admit the peso is too strong when exporters start shouting loud enough or when reserves hit a critical level. That Milei mentioned it is interesting, but one thing is rhetoric and another, action. We’ll have to see if his team has a real plan or if it’s just more noise. In the meantime, for those earning in pesos… hang on tight. It’s going to be a rollercoaster.

President Milei warned a few weeks ago about the dangers of a peso that is too high but haven't seen much since then. Prices in dollar terms are very expensive. I worry that even when inflation slows down things continue to get expensive. Things don't work normally in Argentina.

 

[Uncle Wong]

President Milei warned a few weeks ago about the dangers of a peso that is too high but haven't seen much since then. Prices in dollar terms are very expensive. I worry that even when inflation slows down things continue to get expensive. Things don't work normally in Argentina.

I wonder about this. Do prices ever come down once they go up? It doesn't seem like prices ever go down once they are raised. The USD has gotten stronger everwhere around the world except Argentina and they seem to have as many problems there as always. In a culture when people are accustomed to raising prices all the time I wonder if it will stop now that inflation is slowing down.

I would think there is a limit to how high they can go.

 

[earlyretirement]

I wonder about this. Do prices ever come down once they go up? It doesn't seem like prices ever go down once they are raised. The USD has gotten stronger everwhere around the world except Argentina and they seem to have as many problems there as always. In a culture when people are accustomed to raising prices all the time I wonder if it will stop now that inflation is slowing down.

I would think there is a limit to how high they can go.

That is the tricky part in Argentina that stores don't like reducing their prices once they raise them. Common sense and supply and demand fundamentals often don't work in Argentina. Some stores would rather go out of business than mark down their prices.

Many things like furniture there is no inventory so they don't start making it until you put down a deposit. It's strange because rather than price reasonably and sell more volume stores are stubborn and will keep prices high. I've seen it happen many times before.

Some things in the supermarket the prices are coming down or they will have tons of promos with various firms (Modo, La Nacion discount, Mercado Pago, Uala, etc). What I notice is that many, many products are just sitting around. If you walk down a big supermarket aisle, you will often see all the products on the shelves with barely anything taken.

I've been going into Coto almost every day and it's surprising how not many people are buying much stuff. Everyone has their limit and prices just can't keep being raised. Especially when inflation is slowing down.

 

[BuySellBA]

The Central Bank (BCRA) ended the month with a big sale of dollars, and its reserves are now below $28 billion again.

What happened:

The Central Bank had to sell $350 million of its dollar reserves. This is almost 20% of what they had managed to buy earlier in February.

Because of this sale, the total dollar reserves fell by $579 million, putting them under $28 billion.

The Central Bank also sped up the devaluation (lowering of value) of the Peso to meet its 1% monthly devaluation target.

Good news (sort of):

Even with the big sale, the Central Bank still bought more dollars than it sold overall during the week (a net positive of $69 million).

For the whole month, they bought $1.4365 billion.


For the year, they've bought $2.963 billion.

Important points:

The amount of trading was very high, more than double the previous day, as people got ready for a long weekend (Monday and Tuesday are a holiday in Argentina).

To make the Peso weaker as planned, the Central Bank increased the official exchange rate by $2.50, much higher than the $0.25 it had been doing daily. This helped make the dollar sales more expensive.

The official exchange rate ended February at $1061.75/1064.75 (buy/sell), an increase of 1.07% for the month and 3.17% for the year.

The Central Bank said the dollar sales were due to normal month-end demand, some provinces paying debts (likely Buenos Aires province with a $350 million bond payment), and banks adjusting their positions.

The not-so-good:

The Central Bank's total reserves are down $312 million for the month and $1.612 billion for the year, closing at $27.995 billion.

The net reserves (the dollars the BCRA actually owns) are still negative, over $4.3 billion. This is why the government is keeping tight controls on the exchange rate ("CEPO").

Why this matters:

The weak reserves are making investors nervous.

This is causing market corrections (downturns) and pushing the country's risk level up.

Unofficial exchange rates (financial dollars) are rising above $1200, despite the government's efforts to control them.

In simple terms: Argentina's Central Bank is struggling to keep its dollar reserves up. It had to sell a lot of dollars, which pushed reserves down. To meet targets, they devalued the Peso faster. The situation is making investors worried and putting pressure on the exchange rate.

 

[Bingo]

Seems like buying dollars mostly every day then sells some at the end of the month. I really don't understand all of it. But looking at the official rate you can tell they just manipulate the currency. I wonder how long they will keep that up. Is that why the IMF has never given the money yet? Will they do the same thing once the IMF funds come through??

 

[Larry]

The Central bank sold $224 million dollars today again. Their reserves are actually going down! Look at the reserves. They just can't build it up even with these communist currency controls in place by Milei.

 

[LyellLanatone]

If seems like Milei is betraying all of his deepest principles. He will surely regret this later.

Better to go down doing what you believe in than live another year selling your soul

 

[earlyretirement]

If seems like Milei is betraying all of his deepest principles. He will surely regret this later.

Better to go down doing what you believe in than live another year selling your soul

Well many of the promises he has made. But for sure being President is a lot tougher than before on the campaign trail making totally impossible promises like shutting down the Central Bank, dollarizing the economy and getting rid of China as a trade partner.

 

[IrishLad]

If seems like Milei is betraying all of his deepest principles. He will surely regret this later.

Better to go down doing what you believe in than live another year selling your soul

It seems like Caputo is running the show. These aren't Libertarian policies that he is following. I don't understand the big purchases and then sales one day from the next. It is troublesome that they can't build up their reserves and net reserves are still negative by a few billion.

 

[Stan]

The Central bank sold $224 million dollars today again. Their reserves are actually going down! Look at the reserves. They just can't build it up even with these communist currency controls in place by Milei.

View attachment 8855

Hey Larry. Were you complaining when Masssa was burning dollars for 9 months straight lowering reserves from $29 million to $21 million trying to win the elections. That would be ugly.... oh wait!

Were you complaining then?

 

[Betsy Ross]

Hey Larry. Were you complaining when Masssa was burning dollars for 9 months straight lowering reserves from $29 million to $21 million trying to win the elections. That would be ugly.... oh wait!

Were you complaining then?

This is what bugs me. The people complaining about Caputo or Milei didn't seem to mind when Massa or CFK was doing it. Only difference was that the blue rate kept going up. Now the government has cut spending and the blue isn't going up as much they are complaining. I do still feel like the peso is overvalued but at least the government has cut spending. I don't know all the ins and outs of the intervention and what the exchange rate would be if they stopped all of that.

 

[Larry]

I'm not sure I agree with any intervention at all. It could have unintended consequences. Agree they don't need to and can't afford to keep with intervention. I guess we will find out what fair value of the peso is once it ends. Argentina can't keep it up forever. I have seen several cycles of boom and bust but we have never had someone like Milei in place. This time feels different but I'm still worried.

I don't know what the fair value is but Argentina is very expensive for the low salaries that locals have. No one can say what the peso will do.

This government continues on with their manipulation of the peso. They have wasted billions of dollars supporting the peso. This game will end eventually.

Caputo ya gastó casi US$ 3.000 millones para frenar el dólar en torno $1.200

Por una ventanilla el BCRA compra dólares pero por la otra vende parte de esos billetes en la brecha

eleconomista.com.ar

 

[Avocado]

I saw the Central Bank sold $474 million dollars today. Blue is also going up. Macri vibes.

 

[earlyretirement]

I've been saying the peso is overvalued for a while now. Fell yesterday 1.2% and today another 1.2%.

 

[MikeRoss]

@StatusNomadicus it said in the interior it went as high as 1290 this morning! Are you seeing that in Mendoza? Seems like the peso is falling hard now.

 

[summer lover]

Incredible jump in the blue dollar, do you think it will keep rising?

 

[Uncle Wong]

Incredible jump in the blue dollar, do you think it will keep rising?


View attachment 8918

It will make those that have dollars (like me) happy but inflation will probably spike so not sure.

 

[earlyretirement]

On Friday I mentioned that big money started closing out of their carry trade positions.

On Friday the Central Bank had to sell $474 Million USD
Yesterday (Monday) they had to sell $56 Million USD
Today they had to sell $215 Million USD.

Smart money knows that it's time to get back into the US Dollar.

Devaluation most likely coming soon.

I have been posting that the Argentine peso was drastically overvalued. Governments can manipulate their currency and they might be successful for a while. Sometimes years, but the market always will bring it to its true value over time. Let's see where we end up by the time the elections are here.