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 has tended to slow in recent months, with core inflation persisting in many advanced economies and easing in much of emerging and developing economies. Central banks in the former maintain or even raise interest rates, while those in the latter have begun to reduce them. A scenario of “higher rates for longer” is consolidating in the markets, with its impact on bonds and stocks, and currencies. The U.S. dollar, which had been depreciating so far this year, has appreciated at the margin; this is also reflected in the prices of raw materials.
Agricultural commodities show some retraction, while oil strengthens in the
face of supply constraints.
In this context, during September the BCRA and the entities purchased USD 433 million and USD 18
million in the foreign exchange market, respectively, in response to the sales of the entities’ customers for USD 353 million and the net payments made by the BCRA through the Local Currency Payment System for USD 98 million.
The “Non-Financial Private Sector” was a net seller of foreign currency for USD 675 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 1,602 million, 80% less than in the same month of 2022. The lower net income from goods in the sector during September is due to the effects of the drought on exportable output.
The “Real Sector excluding Oilseeds and Cereals” was a net co-purchaser of foreign currency for a total of USD 428 million, exhibiting a year-on-year reduction of 78%, which is mainly explained by lower net purchases in the goods and services and other current accounts.
“Individuals” netly purchased USD 578 million, mainly for travel expenses and other consumption made with cards with non-resident suppliers (with a net result of USD 397 million) and for hoarding (with a net of USD 159 million for ticket purchases).
The “Institutional investors and others” sector, both resident and non-resident, made net sales in the month of USD 78 million.
The foreign exchange current account registered a surplus of USD 511 million in September, explained by the
surplus of the Goods account of USD 1,406 million, partially offset by the deficits of the Services, Primary Income and Secondary Income accounts of USD 461 million, USD 425 million and USD 10 million, respectively. The financial account of the “Non-Financial Private Sector” had a deficit of USD 632 million in September.
This result was explained by the cancellations of foreign currency balances with local entities for the use of cards with non-resident suppliers for USD 282 million (which do not entail a net demand for foreign currency in the financial account), by the records of exchange operations for net transfers abroad for USD 250 million (largely explained by the registration 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.), for the outflows of other foreign financial debts and debt securities for USD 103 million, for the formation of foreign assets for USD 84 million and for the net outflows of loans from international organizations for USD 15 million, partially offset by foreign direct investment income of USD 85 million and income from the purchase of securities of USD 9 million.
The operations of the foreign exchange financial account of the “Financial Sector” resulted in a surplus of USD 409 million. This result was mainly explained by the decrease of USD 429 million in the liquid foreign assets of the entities that make up the General Exchange Position (PGC) and by the net income from financial loans of USD 16 million, movements partially offset by the net sale of securities for USD 33 million and by net payments of loans to international organizations for USD 3 million.
The operations of the foreign exchange financial account of the General Government and the BCRA were in deficit by USD 923 million, mainly explained by the net cancellations of financial debt for USD 702 million and loans from international organizations (excluding the IMF) for USD 124 million.
In September, the BCRA’s international reserves decreased by USD 894 million, ending the month at a level of USD 26,925 million. This decrease was mainly explained by the net payments of principal and interest with international organizations (except the IMF) and other financial debt of the National Treasury for USD 1,004 million, by the fall in the price in US dollars of the assets that make up the reserves for USD 281 million and by the net payments settled by the BCRA through the Local Currency Payment System. partially offset by the BCRA’s purchases in the foreign exchange market.