Electoral Sunday mars Argentine economy

Interest rates have climbed again, going beyond 13 per cent. No measure can stop them. The public has a passion for stocking and so it buys electrical appliances, probably believing that prices may rise. Companies also act in tune: they produce more than demanded, fearing inflation and future energy problems. Dollar only fluctuates upwards (as opposed to the rest of the world) due to buying anxiety of the people. Yesterday, Argentine Central Bank (BCRA) intervened again to curb rising pressure of the American currency, allowing it leap to ARG$3.19. If someone cannot understand this phenomenon, BCRA data confirm such collective distrust, which imagines inflation and a higher dollar in the future: Argentine reserves have plummeted $1.62 billion in almost three months. Maybe, all this stems from a widespread anxiety over elections. Or is there any other hidden fear?

Dollar opened the week with a rising trend. Companies and the public are protecting themselves with the American currency because they have no possibilities of investing in Argentina: stocks are volatile; bonds are not reliable due to measurements of Argentine Statistics and Census Institute (INDEC, in its Spanish acronym); and interest rates are really negative with respect to real inflation.

In exchange agencies, a massive influx of people is observed. The American currency quoted at ARG$3.19 for sale (one cent up with respect to Friday) and between ARG$3.14-ARG$3.15 for purchase. The re-emergence of buying in small amounts shows on growth of trading in MEC (market where money changers obtain foreign currencies).

Meanwhile, in Forex-MAE (main wholesale market), dollar climbed up to ARG$3.17 by midday and ended at ARG$3.1690. Argentine Central Bank (BCRA, in its Spanish acronym) did not intervene and its reserves settle at $42.6 billions. Buyers and sellers were always private hands. In Forex-MAE, $222 millions were traded and, after close, strong $45-million purchase orders came in for today, against sellers for only $15 millions. In future market, where BCRA did not participate either, dollar climbed in all terms. For the end of the month, dollar is worth ARG$3.1665 (+0.11 per cent), while for the end of the year, it closed at ARG$3.19 (+0.25 per cent). The longest position traded (September end 2008) was paid at ARG$3.3165 (+0.29 per cent). Future trading in OCT was high: $122 millions, doubling that of Rofex Rosario (leading market till some months ago).

Meanwhile, bonds had steep falls, sliding as much as 3.26 per cent. Investors are covering themselves and do not want risk till elections have finished.

Peso-denominated Discount lost 1.12 per cent and went as far as to touch 2 per cent down. By close, it trimmed lows. Par in the same currency plummeted 3.26 per cent with poor trading, having banks as sellers.

Post-default bonds in domestic currency plunged 0.50 per cent on average, though trading was poor. Dollar-denominated post-default instruments also slid. BODEN 2013 crashed 0.40 per cent, while 2012, 0.10 per cent. Argentine country-risk climbed again. It settled at 388 points (+0.59 per cent).

Fragility

However, the world is suffering from risk aversion today due to fragility left by US mortgage crisis. Yesterday, Wall Street traded with great caution and climbed 0.33 per cent. Yet, it may rise steeply today, since, Apple's balance was revealed after NYSE closed, proving better than expected. The bond climbed 6 per cent.

Apple may pass on optimism by showing that corporations keep on earning money.

Global investors are afraid of US growth slowdown and of negative corporate balances (less dividends paid).

Meanwhile, rates paid by banks in Argentina are rising despite government requests. For 30-day time deposits, the average private banks are paying jumped to 13.06 per cent annual against 12.50 per cent last week. This rate still fails to attract wholesale investors.

"Anyone having money seeks to be paid," a trader said and put as an example what's going on in repo market, where banks and BCRA trade. The monetary authority places cash at low rates, but when transactions are made on the fringes of such official entity, rates soar to 9 per cent annual for one-day cash and to 12 per cent annual for 7 days.