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 February.

Main aspects

Again in February, the Central Bank made net purchases through the foreign exchange market, this time for USD 633 million. For its part, the BCRA’s international reserves increased by USD 3 million in the month, mainly affected by the net payments of principal and interest on debt of the National Government and by the fall in the prices of the different reserve assets in relation to the US dollar.

The world economy continues to go through a health and economic crisis in the face of the COVID-19 pandemic, with impacts on both the level of global and local activity, trade flows and capital movements. In recent months, the BCRA has implemented regulatory modifications that affect the foreign exchange market in order to promote a more efficient allocation of foreign currency. In this context, the clients of the entities and they sold USD 632 million and USD 1 million net in the foreign exchange market, respectively, which were purchased by the BCRA. The National Treasury made direct purchases from the BCRA for USD 456 million.

The real sector was a net seller of foreign currency for USD 1,161 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 2,121 million. This level was a record for the month of February and more than doubled the revenues recorded in the same period of 2020, in a context of high international prices of agricultural commodities.

The “Real Sector excluding Oilseeds and Cereals”, on the other hand, was a net buyer in the foreign exchange market with a total of USD 959 million. The purchases were mainly intended to make payments for goods and services, and to pay off financial debt.

“Individuals” bought USD 157 million net, basically for expenses made with cards for consumption with non-resident suppliers (about USD 94 million, showing a drop of 54% compared to the same month of the previous year, in the context of the continuity of the COVID-19 pandemic) and for hoarding (USD 91 million in banknotes, with a decrease of 34% compared to the previous month).

The “Institutional investors and others” sector, both residents and non-residents, made net purchases in the month for USD 14 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 751 million. This result is mainly explained by the high net result for “Goods”, which was also a record for a February, partially offset by net purchases for “Primary income” and “Services”.

The foreign exchange financial account of the “Non-Financial Private Sector” had a deficit of USD 368 million as a result of net cancellations of financial debt and purchases of banknotes by individuals, partly offset by net income from foreign direct investment.

The operations of the foreign exchange financial account of the “Financial Sector” resulted in a surplus of USD 219 million, explained by the decrease in the liquid foreign assets of the entities that make up the General Exchange Position (PGC) by USD 249 million, partially offset by the net cancellations of financial debt and credit lines.

The operations of the foreign exchange financial account of the “General Government and BCRA” resulted in a deficit of USD 373 million, mainly explained by the net cancellation of financial debt.