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

During 2023, the world economy faced high interest rates, in an attempt to contain
inflation, and experienced moderate economic growth. Given that inflation is declining in most regions
, an easing of financial conditions could be expected in 2024. However
, it is important to consider two factors. On the
one hand, there are geopolitical tensions that could
put upward pressure on commodity prices and prolong restrictive monetary policy measures. On the other hand, doubts have been raised about the speed of the aforementioned decrease in
inflation, which generates the expectation that interest rates in advanced countries could take longer to start falling. Regarding the prospects for global economic growth, there are certain concerns linked to the complications in China’s stock and real estate markets, which could have a negative impact on international performance.
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 March the BCRA continued with the BOPREAL auctions, having already awarded all series 1 and 2, for VN USD 5 billion and VN USD 2 billion, respectively, and another VN USD 1,197 million corresponding to series 3.
In March, the entities’ customers sold USD 2,583 million in the foreign exchange market,
while the entities sold USD 276 million. For its part, the BCRA bought USD 2,882 million in the foreign exchange market and made net payments through the Local Currency Payment System (SML) for USD 23 million. In addition, the National Treasury made direct purchases from the BCRA for USD 469 million.
The “Non-Financial Private Sector” was a net seller of foreign currency for USD 2,822 million in the
foreign exchange market. Within this group, the “Real Sector excluding Oilseeds and Cereals” was the main sector offering foreign currency, registering net revenues of USD 1,573 million, largely explained by its result under the heading “Goods”. In turn, the “Oilseeds and cereals” sector recorded net revenues of USD 1,492 million, 116% more than in the same month of 2023.
“Individuals” bought USD 222 million net, mainly for travel expenses and other consumption made with cards with non-resident suppliers, with a net result of USD 249 million.
The “Institutional investors and others” sector, both residents and non-residents, made net purchases of USD 21 million.
The foreign exchange current account registered a surplus of USD 1,804 million in March, explained by net income in the Goods account of USD 2,424 million, partially offset by the deficit of the Primary Income and Services accounts of USD 462 million and USD 158 million, respectively, while secondary income operations were offset.
The foreign exchange financial account was in deficit of USD 1,565 million in March, a result that is explained by the deficits of the sectors “National Government and BCRA” and “Other Net Movements” of USD 1,544 Evolution of the Foreign Exchange Market and Exchange Balance / March 2024 | BCRA |
5 million and USD 712 million, respectively, partially offset by the surpluses of the
“Non-Financial Private Sector” and “Financial Sector” sectors of USD 384 million and USD 307 million, respectively.
In March, the BCRA’s international reserves rose by USD 437 million, ending the month at a level of USD 27,127 million. This increase was mainly explained by the BCRA’s net purchases in the foreign exchange market for USD 2,882 million and by the increase in the price in US dollars of the assets that make up the reserves for USD 194 million, partially
offset by net capital payments to international organizations (excluding the IMF) for USD
1,414 million, due to the fall in the foreign currency holdings of the entities in the BCRA by USD 418 million, by the net outflows of interest and other financial debt of the General Government and BCRA by USD 359 million and by the net payments made by the BCRA through the Local Currency Payment System (SML) for USD 23 million.