Saturday, April 1, 2023

How to deal with the dollar crisis: what to invest in in the midst of a currency run

Investors have to decide what to do with their money, but it’s clear that paying for dollars at current prices seems like an exaggeration.

we are in the middle of a Exchange run. The crisis began with the sale of inflation-adjusted bonds in the first week of June, intensified with a ban on imports and spiraled out of control with the departure of Guzmán, where we spent more than 24 hours without knowing it. that who will replace him and even with one. Bank Central without knowing whether it has to declare next Monday a banking and forex holiday or not.

All this with the biggest issue of the peso in a month, June saw an increase weight stock in 13% of the total. The result was the dollar’s rally from $205 at the end of May to more than $350 on Friday, closing the fiscal dollar between $312/$330.

Beyond the bullfights we’ve been experiencing, it doesn’t infect financial sector, At least for the moment. Private deposits in dollars stood at US$15,063 million as of July 20, meaning a 2.7% drop in 50 days, not an alarming figure given the magnitude of the run. On the other hand, fixed deposits, both conventional and adjusted for inflation (UVA), continue to grow. His stock is up 14% to $5.1 billion.

This is extremely important to understand the magnitude of the crisis. Although it is a positive fact that Bank deposits It is also worrying to see that without facing a flight of deposits, the dollar rose by 50%, if it did, how much could the dollar be worth? Therefore it is necessary to cancel any race as soon as it starts.

Beyond the bullfights we’ve been experiencing, it doesn’t infect financial sector

Private Deposits In Dollars Are Us$15,063 Million As Of July 20

Private deposits in dollars are US$15,063 million as of July 20

What is the impact of the latest measures

The measures that have been implemented in the recent past have increased taxes on credit card spendMore restrictions on the operation of Dollar MEPs and CCLs do not appear to be going in the right direction. Even if we manage to stabilize the dollar at these values, we are talking about a gap between official dollars and free ones, on the order of 150%, a fact that affects economic activity. makes normal development impossible.

These gaps create devaluation expectations and, with restrictions on imports, provoke retention of goods Given the uncertainty of its replacement price by industries and a surge in prices as a hedge. Preliminary figures speak of inflation above 6% for July and some advisers are encouraged to say we will exceed 8%.

In this environment, investors should decide what to do with our money, Paying current values ​​for the dollar seems like an exaggeration, today they would have more to go down than to go up. But it is true that no one buys dollars in a bull run because they think they are cheap or expensive, they buy because they think they will continue to rise tomorrow.

Truth is this Looks like it’s time to buy dollars, those who were able to do this in time have achieved very good coverage of their capital, for example someone who bought US$1,000 today in May still has US$1,000, but they are worth about US$120,000 more. Is. The stock acted as some hedge but fell far short of the dollar’s jump.

What happens after that, even if they can stop the race on the dollar, the price jump is already happening. This will increase inflation And the instruments it indexes will receive that increase. But it is not without risk, on the one hand they cannot stop the rise in the dollar and unless they have to devalue the official dollar, on the other hand the peso and eventually the risk of not being able to renew the loan maturity. rescheduling them. Changing the basic conditions, this is an option that the government refuses but taking into account the situation in the country and the type of Argentine debtor, the investor is obliged to consider it.

Those Who Were Able To Buy Dollars Were Able To Do So In A Timely Manner, Have Achieved Very Good Coverage Of Their Capital.Those who buy dollars on time have achieved great coverage of their capital.

Looks like it’s time to buy dollars

As always, fate will be in the hands Measures taken by BCRA That so far aggressively refuses to withdraw the peso which causes this run and to raise rates. It is not bad that the Treasury leads a positive rate in the market, but in the context of rising inflation, the institution cannot forget about the correct remuneration of deposits in pesos.

in moments of high uncertainty It is best to diversify investments to reduce risk, thus keeping part of the capital in hard currency, but also assigning a percentage to instruments that adjust for inflation. Consult your financial advisor to find the best balance for your portfolio as per your investor profile. The more volatility, the more dedication time your investment requires, don’t forget that it’s all about your money. Until next week.

Nation World News Desk
Nation World News Desk
Nation World News is the fastest emerging news website covering all the latest news, world’s top stories, science news entertainment sports cricket’s latest discoveries, new technology gadgets, politics news, and more.
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