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 June.

Main aspects

The global economy continues to recover, but moderating its pace in the face of the uncertainty associated with the armed conflict between Russia and Ukraine and the increase in benchmark interest rates in the world’s main economies due to the rise in inflation mainly as a result of the increase in international energy and food prices and disruptions in input supply chains. In this context, the BCRA continued to improve foreign exchange regulation in order to promote a more efficient allocation of foreign currency. In June, the BCRA bought USD 1,046 in the foreign exchange market from entities and their customers, who sold USD 545 million and USD 442 million, respectively. Likewise, the BCRA made net payments through the Local Currency Payment System for USD 59 million.

The “Real Sector” was a net seller of foreign currency for USD 1,103 million. Within this group, the main sector in terms of net sales in the foreign exchange market, “Oilseeds and cereals”, recorded net revenues of USD 3,684 million, an amount similar to that of the same month in 2021.

The “Real sector excluding Oilseeds and cereals” was a net buyer for a total of USD 2,581 million, exhibiting a year-on-year drop of 4%. The purchases were mainly intended to make payments for imports of goods and services, and to pay off financial debt.

The “Individuals” bought USD 577 million net, basically to meet expenses made with cards for consumption with non-resident suppliers and for treasury, for USD 375 million and USD 157 million, respectively.

The “Institutional Investors and Others” sector, both resident and non-resident, made net purchases in the month for USD 72 million.

The foreign exchange current account, which includes net flows from net exports of goods and services and primary and secondary income, registered a surplus of USD 522 million. This result was explained by net income from “Goods” of USD 1,678 million, partially offset by the deficit results of “Services” and “Primary income” of USD 896 million and USD 261 million, respectively. The foreign exchange financial account of the “Non-financial private sector” had a deficit of USD 385 million in the month. The records for the cancellations of balances in foreign currency with local entities for the use of cards with non-resident suppliers for USD 249 million (which do not entail a net demand for foreign currency), the cancellation of loans abroad and debt securities for USD 97 million and with international organizations for USD 38 million stood out. while the formation of foreign assets resulted in outflows of USD 62 million during the month.

The operations of the foreign exchange financial account of the “Financial Sector” resulted in a surplus of USD 179 million, mainly due to the fall of USD 185 million in the liquid foreign assets of the entities that make up the General Exchange Position (PGC).

On the other hand, the operations of the foreign exchange financial account of the “General Government and BCRA” resulted in a surplus of USD 1,482 million, mainly explained by the net disbursements of the International Monetary Fund for USD 1,326 million (3,000 million SDRs).

In June, the BCRA’s international reserves increased by USD 1,226 million, ending the month at a level of USD 42,787 million. This increase was mainly explained by the disbursements of the International Monetary Fund for the equivalent of USD 1,326 million (SDR 3,000 million) and by the net purchases of the BCRA in the foreign exchange market, partially offset by the fall in the price in US dollars of the assets that make up the reserves, the fall in the holdings in foreign currency of the entities and the net payments through the Foreign Exchange System Premises.