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

This report analyzes the evolution of purchases and sales of foreign currency in the foreign exchange market, corresponding to August.

Main aspects

In a context of volatility in emerging markets with an impact on the local level, the BCRA made net spot sales of US$ 4,067 million which, added to the sales made by banks and other foreign exchange entities for US$ 732 million, were acquired by private sector clients (US$ 3,694 million), by the National Treasury (US$ 638 million) and by other public sector agencies (US$ 467 million).

Within the private sector, the main buyers in net terms were “Institutional investors and others” and “Individuals” with about US$ 2,000 million each, followed by net purchases of “Other real sector” for US$ 1,400 million, partially offset by net income from the “Oilseeds and cereals” sector for about US$ 1,800 million.

Due to lower payments for imports of goods and services and net purchases of banknotes for treasury, “Individuals” and “Others in the real sector” decreased their net demand by US$ 1,200 million compared to July. This drop was observed again in the first three weeks of September by an additional US$ 1,000 million.

The volume traded in the foreign exchange market totaled US$ 46,223 million (around US$ 2,100 million on a daily average), a level that did not vary in the year-on-year comparison.

The operations recorded in the current account of the foreign exchange balance were in deficit by US$ 396 million, explained by the net expenditures in the “Services” and “Primary income” accounts of US$ 689 million and US$ 317 million, respectively, partially offset by the surpluses of the “Goods” and “Secondary income” accounts, which recorded net income of US$ 594 million and US$ 15 million. respectively.

The deficit of US$ 4,019 million in the capital and financial account of the “Non-Financial Private Sector” was mainly explained by the expenditures recorded by the formation of foreign assets of residents for US$ 2,790 million, by the net outflow of securities in the secondary market for about US$ 1,200 million and by the net repatriations for investments by non-residents for US$ 417 million.

The operations of the capital and financial account of the “Financial Sector” resulted in a deficit of US$ 1,103 million, explained by the increase in the liquid foreign assets of the entities that make up the General Exchange Position by US$ 806 million and by the cancellations of financial loans and debt securities for about US$ 300 million.

The foreign exchange capital and financial account of the public sector and BCRA resulted in a deficit of US$ 1,731 million, highlighting the net payments of LETES denominated in dollars for about US$ 1,500 million and the purchases of foreign currency for the constitution of local deposits and other debt payments for about US$ 1,100 million, expenditures that were partially offset by the net income of financial loans for US$ 756 million.

With these movements, the BCRA’s international reserves decreased by US$ 5,338 million during the month, closing at a level of US$ 52,658 million.