Report on the Evolution of the Foreign Exchange Market and the Foreign Exchange Balance

Executive summary

In January, the BCRA and the National Treasury made net purchases in the foreign exchange market for USD 1,158 million and USD 265 million, respectively, while the entities and the entities’ customers sold USD 740 million and USD 638 million, respectively. For its part, the BCRA made net payments through the Local Currency Payment System (SML) for USD 45 million.

The “Non-Financial Private Sector” was a net seller of foreign currency for USD 548 million in the foreign exchange market. Within this group, the “Oilseeds and Cereals” sector was the main sector offering foreign currency in the foreign exchange market during the month, registering net sales of USD 2,121 million, largely explained by its result under the heading “Goods”. In turn, the “Real Sector excluding Oilseeds and Cereals” recorded net sales of USD 1,311 million, mainly explained by net income from “Debt, FDI, portfolio and other operations” of USD 1,588 million.

“Individuals” had the largest sectoral net purchase of foreign currency of the month for USD 3,146 million, mainly due to net purchases of non-specific purpose banknotes for USD 2,203 million.

It should be noted that part of these funds is deposited in local accounts or is later used to pay off purchases with cards in foreign currency and therefore does not increase the position of foreign assets of the private sector. In the same way, foreign exchange outflows, which mostly constitute transfers of local deposits abroad (exchange operations), can be used to cancel foreign liabilities (for example, for payments of foreign commercial and financial debt or profits and dividends).

In what was the exchange balance of January, a current account deficit of USD 919 million was recorded, mainly explained by the net outflows of the “Primary income” and “Services” accounts for USD 2,007 million and USD 946 million, partially offset by the net income of “Goods” and “Secondary income” for USD 2,014 million and USD 20 million. respectively. In turn, the foreign exchange financial account was in surplus of USD 3,147 million. This result was explained by the surpluses of the “Financial Sector”, “Other Net Movements” and the “National Government and BCRA” of USD 1,668 million, USD 1,363 million and USD 584 million, respectively, partially offset by the net expenditures of the “Non-Financial Private Sector” of USD 469 million.

The BCRA’s international reserves increased by USD 3,336 million in January, ending the month at a level of USD 44,503 million. This result was mainly explained by the entry of a REPO operation of the BCRA with international banks for USD 3,000 million. In turn, there was an increase in international reserves due to the increase in the foreign currency holdings of the entities in the BCRA for USD 2,202 million, due to the increase in the price in US dollars of the assets that make up the reserves for USD 1,240 million, due to the purchases of foreign currency in the foreign exchange market by the BCRA for USD 1,158 million and the National Treasury for USD 265 million. These movements were partially offset by the net cancellation of principal and interest on public securities for USD 4,404 million, and for the net payments made by the BCRA through the SML for USD 45 million.