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.

Executive summary

The world economy is growing at a modest pace, but with favorable prospects. Tight monetary conditions
continue to have an impact, especially on credit and construction markets, while inflation is falling faster than expected, so private sector confidence is strengthening. There is evidence of a divergence in the evolution of the different economies, mainly between the poor performance of the advanced economies of Europe and the strong growth of the United States and some emerging economies.
At the local level, in line with what was decided by the authorities and announced in the monetary and exchange rate policy objectives and plans
for 2024, a zero monetary financing target for the National Treasury was set for 2024. In addition, in June, the eighth revision of the International Monetary Fund’s Extended Facilities Program in force with Argentina was approved, where a disbursement of 600 million Special Drawing Rights (SDRs) was agreed and new goals for the accumulation of reserves, fiscal balance and monetary financing were recalibrated. In turn, the BCRA and the Popular Bank of China (PBOC) renewed the entire activated tranche of the swap for RMB 35 billion (equivalent to USD 5 billion) between the two institutions for a period of 12 months.
Regarding the result in the foreign exchange market, in June, the entities’ customers bought USD 262 million in the foreign exchange market and the entities sold USD 126 million. For its part, the BCRA made net sales of USD 85 million and made net payments through the Local Currency Payment System (SML) for USD 52 million. Additionally, the National Treasury made direct purchases from the BCRA for USD 212 million.
The “Non-Financial Private Sector” was a net seller of foreign currency for USD 25 million in the foreign exchange market. Within this group, the “Oilseeds and Cereals” sector was the main sector offering foreign currency, registering net revenues of USD 1,601 million, largely explained by its result under the heading “Goods”. The “Institutional Investors and Others” sector, both resident and non-resident, made net purchases of USD 70 million. For its part, the “Real Sector excluding Oilseeds and Cereals” sector recorded net outflows of USD 1,234 million, while “Individuals” recorded net outflows of USD 411 million, mainly for expenses for travel, tickets and other consumption made with cards with non-resident suppliers, with a net purchase result of USD 431 million.
In what was the exchange balance of June, the foreign exchange current account registered a deficit of USD 223
million in June, explained by net outflows in the accounts “Primary Income”, “Services” and “Secondary Income
” of USD 533 million, USD 368 million and USD 117 million, respectively, partially offset by the surplus of the “Goods” account of USD 795 million. In turn, the foreign exchange financial account was in surplus of USD 634 million in June, a result that is explained by the surpluses of “Other Net Movements” and the “National Government and BCRA” of USD 616 million and USD 522 million, respectively, partially offset by the deficits of the “Financial Sector” and the “Non-Financial Private Sector” of USD 332 million and USD 172 million. respectively.
The BCRA’s international reserves increased by USD 358 million in June, ending the month at a level of USD 29,022 million. This increase was mainly explained by the gross disbursements of Exchange Market Evolution and Exchange Balance / June 2024 | BCRA | 5 capital of the International Monetary Fund of USD 791 million (SDR 600 million), due to the increase in the foreign currency holdings of the entities in the BCRA by USD 204 million, partially offset by the net payments of principal and interest to international organizations (excluding the IMF)
by USD 469 million, due to the fall in the price in US dollars of the assets that make up the reserves by USD 55 million, by the net payments made by the BCRA through the Local Currency Payment System (SML) for USD 51 million due to the increase, by the settlements of net sales of the BCRA in the foreign exchange market for USD 47 million and by the net payments of interest and commissions to the International Monetary Fund for USD 3 million (SDR 2 million).