Report on the Evolution of the Foreign Exchange Market and the Foreign Exchange Balance

Report on 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. 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. The restrictive monetary conditions that began post-COVID have had an impact on inflation levels. Particularly for the United States and the European Union, the drop in inflation allowed the Federal Reserve (FED) and the European Central Bank (ECB) to lower interest rates for the first time since 2020. The ECB has already done so twice in the year, while the Fed did so for the first time in September, with a cut of half a percentage point.

At the local level, on November 8, the “Asset Regularization Regime” established by Law No. 27,743 and regulated by Decree 608/2024 and Communication “A” 8062 ended. Within the framework of the agreement, the entities received deposits in foreign currency for about USD 22,000 million, of which about USD 7,300 million entered in October. On the other hand, the BCRA took a significant step in the normalization of the foreign exchange market by once again shortening the terms of access to the foreign exchange market (MLC) for the payment of imports, establishing that all goods may be paid 30 days after the registration of customs entry, except for those that have immediate access such as energy.
Regarding the result in the October foreign exchange market, the clients of the entities sold USD 1,037 million in the foreign exchange market and the entities sold USD 413 million. For its part, the BCRA arranged net purchases for USD 1,528 million, made net payments through the Local Currency Payment System (SML) for USD 78 million and sold USD 1,137 million directly to the National Treasury.

The “Non-Financial Private Sector” was a net seller of foreign currency for USD 815 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 1,996 million, largely explained by its result under the heading “Goods”. For its part, the “Real Sector excluding Oilseeds and Cereals” recorded net outflows of USD 657 million.

“Individuals” recorded net outflows of USD 562 million, mainly for expenses for travel, tickets and other consumption made with cards with non-resident suppliers. It should be noted that around 50% of these card purchases are subsequently paid directly by customers with their own funds in foreign currency, which reduces the deficit impact of these purchases on the foreign exchange market and international reserves.

In what was the exchange balance of October, the exchange current account registered a deficit of USD 1,581 million, explained by net outflows in the “Primary Income” and “Services” accounts of USD 1,599 million and USD 744 million, respectively, partially offset by the surpluses of the “Goods” and “Secondary Income” accounts of USD 744 million and USD 18 million. respectively. In turn, the foreign exchange financial account resulted in a surplus of USD 3,128 million. This result was mainly explained by the increase in private deposits recorded in the surplus of “Other Net Movements” of USD 3,501 million under the Asset Regularization Regime, followed by the surplus of the “Non-Financial Private Sector” of USD 637 million. On the other hand, the financial accounts of the “Financial Sector” and the “National Government and BCRA” were in deficit of USD 537 million and USD 473 million.

The BCRA’s international reserves increased by USD 1,446 million in October, ending the month at a level of USD 28,618 million. This increase was mainly explained by the increase in the foreign currency holdings of the entities in the BCRA by USD 1,913 million and by the settlements of net purchases by the BCRA in the foreign exchange market for USD 1,626 million. The aforementioned movements were partially offset by the net outflows for principal and interest payments on loans from international organizations (excluding the IMF), public securities and other financial debts of the National Treasury and the BCRA for USD 1,861 million, by the fall in the price in US dollars of the assets that make up the reserves for USD 111 million and by the net payments made by the BCRA through the Local Currency (SML) for USD 78 million.