Wednesday, February 1, 2023

What should be done with the dollar after the latest US inflation data?

It so happens that, as explained to Ambito Diego Martinez Burzaco, director of Inviu, Dollar still in a Inflation in the United States As in the present these lose value. “The point is that the Argentine who saves in US currency does not do so by thinking about inflation external, but in covering itself against the devaluation of the local currency”, explains economist Christina Butler.

Inflation in the United States and the dollar: what is happening

In year-on-year terms, the inflation rate in November was 7.1 percent.Lower than expected and down from 7.7% in October, confirming a slowdown in price growth. The data shows a declining trend in relation to the record high reached this year, which was 8.6% year-on-year in May.

Although there is a moderation value development And the data is not comparable with the 95% annual expected for this year in Argentina, it is clear that times have changed and a change in mindset is necessary.

That’s what Martinez Burzaco warns when he says,Before the pandemic, with inflation of 2%, the opportunity cost of saving dollars was very low, but now we are talking levels between 6% and 7%, with peaks of around 9%., As such, the Economist says that we are “facing a combination change that requires thinking about more effective coverage options.”

Is it convenient to have dollar bills?

In this sense, Xavier Marcus, economist at Southern Trust, points out that savers face a contradiction. Dollar On Demand Vs. Investment, “If you choose the first option, you lose against us inflationwhich is high, and with the market anticipating a recession following a strong expansion encouraged by the government”, he explained.

what happens Argentines who want to protect savings from local variables of the economy and lose sight of inflation in the United States, And, on this point, it is true that Maria Castiglioni, director of CyT Asesores Económicos, says when she affirms that, “there is a double perspective: on the one hand, inflation in the United States, which makes devaluation for the dollarBut you also have to think about the purchasing power and projections of that currency in Argentina”.

Regarding these last elements economists acknowledge that this year, the dollar blue lost purchasing power because it was behind local inflation, But then, why do many savers continue to turn to dollar bills? A first element he mentioned as a key variable in this regard is the fact that “Argentine savers have few investment options”.

peso bill thousand 1000 inflation liquidated interest rate

Fixed terms in pesos beat inflation and the blue dollar underperformed.

Mariano Fuchilla

maybe it would have been better to go bowl, Which currently stands at 6.25% per month against 4.9% inflation (as per November data). In fact, there was an increase in the flow of the peso that goes from August to the present day, but Castiglioni mentions that there is a second element that causes the demand for the dollar to continue by savers and that is the projection of exposure to Dollar denominated in or associated with a local property denominated in pesos inflation,

And, although he assures that many players have better prospects for 2023, most analysts suggest Look for investments that guarantee an income that allows the asset to recover as much value as possible, rather than living in dollar bills these days.,

Thus, in Butler’s words, the best thing for savers today is to “look for some return on your dollar because saving banknotes with annual inflation of 1% is not the same as compared to inflation of 7%. 8% in the United States.” joined in”.

With Inflation High In The United States, What To Invest In?

Although Marcus points out that, “with a local inflation so high (as in Argentina today), the influence of the foreign is very small”, mentions that, in this new context, it is clear that a significant annual percentage is being lost, for which, with current levels of capitalization, not in cash The incentive to be there is great.

Thus, it is clear that the best option at the moment is invest dollars In a property that guarantees some interesting income. There are many options for converting a portfolio into dollars: from CDIs to negotiable obligations with a yield in dollars. There are also dollar linked assets, for example. “Today the investment potential In corporate bonds of high credit quality With yields between 4% and 6% per year, Martinez adds Burzaco to the list.

And another option that Castiglioni mentions is, for example, being United States Treasury Bondsgrowing thanks to rate policy against inflation by federal Reserve Of that country, all right.

“You have to think about which assets to invest in dollars and not necessarily dollar bill”, The expert highlighted, however, she believes that it is quite possible that inflation will moderate next year AmericaPoint out that there is still a long way to go to firmly establish this path.

Nation World News Desk
Nation World News Desk
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