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 March.

Global economic activity continued to slow in recent months and global growth forecasts continued to decline. This scenario occurred in a scenario in which the persistence of high inflation led central banks in advanced economies to implement the largest cycle of contractionary monetary policy since the global financial crisis of 2008/09. While financial conditions for developing countries improved at the margin, a mostly adverse environment of high interest rates and net capital outflows still prevails.

In March, the entities’ customers bought USD 2,138 million in the foreign exchange market, and the entities bought USD 49 million, of which the BCRA sold USD 2,070 million in the market and made net payments through the Local Currency Payment System for USD 117 million.

The “Non-Financial Private Sector” was a net buyer of foreign currency for USD 2,053 million in the foreign exchange market. Within that group, the main sector in terms of net sales, “Oilseeds and cereals”, recorded net revenues of USD 689 million, 81% less than in the same month of 2022. This year-on-year drop is mainly explained by the severe drought that seriously affects agricultural production of the main export products.

The “Real Sector excluding Oilseeds and Cereals” was a net buyer of foreign currency for a total of USD 2,118 million, exhibiting a year-on-year reduction of 16%. These purchases were mainly intended to make net payments of imports of goods for USD 1,277 million, services and interest for USD 549 million and passenger expenses for USD 166 million.

“Individuals” bought USD 457 million net, with a year-on-year drop of 20%, mainly for card expenses for consumption with non-resident suppliers (with a net of USD 281 million) and for hoarding (with a net of USD 132 million for ticket purchases).

The “Institutional investors and others” sector, both residents and non-residents, made net purchases in the month for USD 167 million, mainly as net payments for imports of goods.

The foreign exchange current account, which includes net flows from net exports of goods and services and primary and secondary income, registered a deficit of USD 2,020 million. This result was explained by net outflows from the “Services”, “Goods” and “Primary income” accounts of USD 866 million, USD 747 million and USD 432 million, respectively, partially offset by net transfer income of “Secondary income” USD 25 million.

The financial account of the “Non-Financial Private Sector” had a deficit of USD 675 million in March, highlighting the records of exchange operations for transfers abroad for USD 386 million (largely explained by the recording of the counterpart of income from travel and tickets without obligation to settle in the foreign exchange market, for more information see Section III.1.2.), records for cancellations of balances in foreign currency with local entities for the use of cards with non-resident suppliers for USD 290 million (which do not entail a net demand for foreign currency in the financial account), loan payments to international organizations and others for USD 41 million and the formation of foreign assets for USD 4 million, partially offset by net income from local financial loans of USD 56 million, and by income from foreign direct investment of USD 38 million.

In March, the operations of the foreign exchange financial account of the “Financial Sector” resulted in a surplus of USD 181 million. This result is explained by the decrease of USD 203 million in the liquid foreign assets of the entities that make up the General Exchange Position (PGC), partially offset by expenditures for the concepts of financial loans and credit lines for USD 18 million and for the purchase of securities for USD 4 million.

On the other hand, the operations of the foreign exchange financial account of the General Government and the BCRA resulted in a surplus of USD 2,815 million, mainly explained by net disbursements, interest and commission payments to the International Monetary Fund for USD 2,619 million (equivalent to 1,946 million SDRs) and the net inflow of financial debt of other international organizations for USD 362 million. movements partially offset by the cancellation of financial loans for USD 197 million and records for the counterpart of income from exchange operations abroad for USD 51 million.

In March, the BCRA’s international reserves rose by USD 351 million, ending the month at a level of USD 39,060 million. This increase was mainly explained by the net disbursements of the International Monetary Fund of USD 2,672 million (equivalent to 1,986 million SDRs) and by the rise in the price in US dollars of the assets that make up the reserves for USD 502 million, movements that were partially offset by the BCRA’s selling intervention in the foreign exchange market. due to the fall in the foreign currency holdings of the entities in the BCRA and the net payments of the BCRA through the Local Currency Payment System for USD 117 million.