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 February.

Main aspects

In February 2017, the operations arranged in the Single and Free Exchange Market (MULC) by the entities authorized to operate in foreign exchange with their customers resulted in a deficit of US$ 244 million, showing reductions in net outflow of US$ 2,378 million compared to the deficit observed in January (US$ 2,622 million). and US$ 668 million if compared to the same month of 2016 (US$ 912 million).

The entities authorized to operate in foreign exchange, which did not carry out operations with a net result with the Central Bank (BCRA) in the MULC, covered the needs of customers in the foreign exchange market basically by reducing their General Exchange Position (PGC). For its part, the BCRA made purchases directly from the National Treasury for US$ 1,500 million and made payments for foreign trade operations channeled through the Local Currency Payment System (SML) in force with Brazil and ALADI for US$ 43 million.

The volume traded in the MULC totaled US$ 30,820 million (US$ 1,712 million on a daily average), a level 2% higher than in the same month of the previous year, explained by the operations arranged between the authorized entities, and between them and their customers.

Current account operations of the foreign exchange balance were in deficit by US$ 921 million, showing a year-on-year increase in net outflow of US$ 683 million, as a result of lower net income from “Goods” and higher net expenditures from “Services”. Goods transfer operations recorded a net income of US$ 252 million, as a result of export collections of US$ 3,637 million (year-on-year fall of 9%) and import payments of US$ 3,385 million (year-on-year increase of 6%).

Operations registered for services showed a net outflow of US$ 908 million (year-on-year increase of 22%), mainly explained by net expenditures linked to tourist expenditures abroad.  The capital and financial account of the “Non-Financial Private Sector” showed net outflows of US$ 874 million, the main component of which was the net demand for the formation of freely available foreign assets, which totaled US$ 1,865 million (net purchases by banknote customers for US$ 1,727 million and transfers abroad for US$ 138 million).

The capital and financial exchange rate account of the public sector and BCRA resulted in a surplus of US$ 2,358 million, highlighting the income of the National Government from LETES placements of about US$ 850 million (net of payments) and from the issuance of Bontes for US$ 1,711 million. Likewise, income was recorded from debt placements abroad by local governments for about US$ 2,000 million, which were credited to local accounts in foreign currency through “exchanges”.

With these movements, during the month of February the BCRA’s gross international reserves increased by US$ 3,721 million, ending the month with a stock of US$ 50,608 million, returning to the levels last observed in mid-2011.