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.

Main aspects

The global economy throughout the year has been marked by low growth rates and high inflation, particularly core inflation. Faced with this situation, the monetary authorities of advanced economies
have maintained and even raised interest rates, so they are beginning to show some retraction in price increases. For 2024, it is forecast that the outlook will be lower inflation worldwide, which would open the possibility of a reduction in monetary policy rates.
In this context, through Decree 549/2023 of Monday, October 23, a new “Export Increase Program” was introduced, in which it was decided to cover the entire export complex, both of goods
and services and, in addition, allowed exporters to settle 70% of foreign currency at the official exchange rate, being able to channel the remaining 30% through purchase and sale operations with negotiable securities acquired with settlement in foreign currency and sold with settlement in local currency. Its validity was extended until November 17. On November 21, Decree 597/2023 was published, which extended the Export Increase Program, this time allowing 50% of foreign currency to enter through the foreign exchange market and the remaining 50% through the stock market, with an effective date until December 10.
During November, the clients of the entities sold USD 420 million in the foreign exchange market, while the BCRA and the entities bought USD 364 million and USD 59 million in the foreign exchange market, respectively. In turn, the BCRA made net payments through the Local Currency Payment System for USD 3 million.
The “Non-Financial Private Sector” was a net seller of foreign currency for USD 608 million in the
foreign exchange market. Within this group, the “Real Sector excluding Oilseeds and Cereals” became the main net selling sector of foreign currency in the foreign exchange market, with an amount of USD 742 million, mainly explained by the reduction in payments for imports of goods (see section III.1.1). For its part, the “Oilseeds and cereals” sector recorded net revenues of USD 522 million, 62% less than in the same month of 2022. The lower net income from goods in the sector during November is due to the effects of the drought on exportable output and, in addition, to the fact that a portion of export receipts are not recorded in the foreign exchange market, since it is settled through the stock market under the framework of the aforementioned “Export Increase Program” (see Section II).
“Individuals” netly purchased USD 688 million, mainly for travel expenses and other consumption made with cards with non-resident suppliers (with a net result of USD 481 million) and for hoarding (with a net of USD 192 million for ticket purchases).
The “Institutional investors and others” sector, both resident and non-resident, made net sales in the month of USD 32 million.
The foreign exchange current account registered a surplus of USD 58 million in November, explained by the
surplus of the Goods account of USD 1,982 million, partially offset by the deficits of the Primary Income, Services and Secondary Income accounts of USD 1,244 million, USD 678 million and USD 2 million, respectively.
Evolution of the Foreign Exchange Market and Exchange Balance / November 2023 | BCRA |
5 The financial account of the “Non-Financial Private Sector” had a deficit of USD 1,142 million in November.
This result was explained by the records of exchange operations for net transfers abroad for USD 604 million, the cancellations of balances in foreign currency with local entities for the use of cards with non-resident suppliers for USD 318 million (which do not entail a net demand for foreign currency in the financial account), net outflows from local financial loans of USD 149 million, net outflows from loans from international organizations of USD 92 million and net outflows from other foreign financial debts and debt securities of USD 89 million, partially offset by foreign direct investment income of USD 100 million, income from the purchase of securities of USD 8 million and net income from foreign assets of USD 5 millions.
The operations of the foreign exchange financial account of the “Financial Sector” resulted in a deficit of USD 182 million. This result was mainly explained by the increase in the liquid foreign assets of the entities that make up the General Exchange Position (PGC) by USD 144 million, net outflows by foreign direct investment by USD 50 million, by the net purchase of securities by USD 15 million and by net payments of loans to international organizations by USD 6 million. movements partially offset by net income from financial loans of USD 32 million.
The operations of the foreign exchange financial account of the General Government and the BCRA resulted in a deficit of USD 510 million, mainly explained by capital payments to the International Monetary Fund for USD 796 million (SDR 608 million), net cancellations of financial loans for USD 29 million and net outflows for exchange operations for transfers abroad for USD 20 million of securities. partially offset by net income from loans from international organizations (excluding the IMF) of USD 260 million and by net income from sales of external assets of the public sector and financial debt of about USD 72 million.
In November, the BCRA’s international reserves decreased by USD 1,046 million, ending the month at a level of USD 21,513 million. This decrease was mainly explained by payments to the International Monetary Fund of charges, interest and commissions of USD 867 million (SDR 658 million) and principal payments to said organization of USD 796 million (SDR 608 million), by the decrease in the foreign currency holdings of the entities, by the BCRA’s own operations and by the net payments settled by the BCRA through the Local Currency Payment System. partially offset by the increase in the price in US dollars of the assets that make up the reserves for USD 544 million, by the net purchases of the BCRA in the foreign exchange market, and by the net income of capital from interest of international organizations (except the IMF) and other financial debt of the National Treasury for USD 139 million.