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

Executive summary

In July, the BCRA made purchases in the foreign exchange market amounting to USD2,163 million. In turn, institutions’ clients sold USD1,166 million in the forex market, while financial institutions’ sales amounted to USD783 million, and the National Treasury sold USD146 million. The BCRA also made net payments through the Local Currency Payment System for USD68 million.

The “Non-Financial Private Sector” was a net seller of foreign currency in the foreign exchange market (USD502 million). Within this group, the “Oilseeds and Grains” sector was the main supplier with net sales of USD3,505 million, mainly explained by the result in “Goods.”

“Natural Persons” made net purchases of foreign currency for a total of USD4,124 million, mainly explained by purchases of foreign currency banknotes (USD2,916 million), outflows from services and other primary and secondary income (USD786 million) and foreign currency transfers for unspecified purposes (USD546 million). Out of the net purchases of banknotes and foreign currency for unspecified purposes, approximately USD1,000 million remained deposited in local banks and USD1,000 million increased the foreign assets’ position, whereas about USD900 million were transferred to financial institutions to pay card expenses recorded under “Services and Other Primary and Secondary Income.”

In terms of the foreign exchange balance for July, the foreign exchange current account recorded a surplus of USD413 million. This result was explained by the net inflows recorded in “Goods” (USD4,077 million) and “Secondary Income” (USD8 million), which were partially offset by the net outflows recorded in “Primary Income” (USD2,772 million) and “Services” (USD900 million). In turn, the foreign exchange financial account recorded a surplus of USD2,191 million. This result was attributed to the net inflows recorded in the “General Government and the BCRA” (USD2,356 million), the “Financial Sector” (USD1,052 million) and “Other Net Transfers” (USD1,049 million). These records were partially offset by net outflows from the “Non-Financial Private Sector” (USD2,266 million).

During July, BCRA’s international reserves increased USD2,729 million, totaling USD47,599 million by the end of the month. The change was mainly explained by net inflows of principal and interest from international organizations (USD2,621 million, mainly arising from secured loans granted by multilateral organizations to the National Treasury), BCRA’s purchases of foreign currency in the foreign exchange market (USD2,163 million), inflows from new issuances of Argentine government securities in the local market (USD1,063 million), the increase in institutions’ holdings of foreign currency at the BCRA (USD1,307 million), and the increase in the US dollar exchange rate of foreign exchange reserves (USD110 million). These transactions were partially offset by payments of principal and interest on sovereign bonds (USD4,476 million), the sale of foreign currency in the forex market by the National Treasury (USD146 million), and net payments made by the BCRA through the Local Currency Payment System (USD67 million).