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

Executive summary

In May, the BCRA bought USD 2,601 million in the foreign exchange market, while the National Treasury acquired USD 150 million. For their part, customers and financial institutions sold USD 2,232 million and USD 453 million, respectively. In addition, the BCRA made net payments through the Local Currency Payment System (SML) for USD 66 million.

The “Non-Financial Private Sector” was a net seller of foreign currency in the foreign exchange market (USD 2,436 million). Within this group, the “Oilseeds and Cereals” sectors (net sales of USD 2,951 million) and the “Real Sector excluding Oilseeds and Cereals” (net sales of USD 2,103 million) were the main net suppliers of foreign currency.

The “Individuals” made net purchases of foreign currency for USD 2,667 million, mainly explained by foreign currency banknotes and foreign currency transfers without specific purposes for USD 1,804 million and USD 408 million, respectively. In addition, the “Legal Entities” made net sales of banknotes in foreign currency and foreign currency without specific purposes for USD 212 million and USD 114 million, respectively. It should be noted that, of the net purchases of banknotes and foreign currency without specific purposes, it is estimated that about USD 700 million were deposited in local banks and USD 300 million increased the position of foreign assets, while about USD 800 million were delivered to the entities to cover the expenses made with “Services and other current” cards.

In the exchange balance of May, a surplus of USD 1,877 million was recorded in the exchange current account. This result was explained by the net income of the “Goods” accounts (USD 4,322 million, historical maximum without considering months with specific export incentive programs), partially offset by the net outflows of the accounts “Primary income” (USD 1,642 million), “Services” (USD 802 million) and “Secondary income” (USD 1 million). In turn, the foreign exchange financial account was in surplus of USD 1,763 million in May. This result was explained by the surpluses of the “National Government and BCRA” (USD 1,643 million) and the “Financial Sector” (USD 979 million). These were partially offset by net outflows from the “Non-Financial Private Sector” (USD 829 million) and “Other Net Movements” (USD 31 million).

The BCRA’s international reserves increased by USD 3,678 million in May, ending the month at a level of USD 48,193 million. This result was explained by the purchases of foreign currency in the foreign exchange market by the BCRA (USD 2,601 million), the disbursement of capital by the IMF (equivalent to USD 1,043 million), the income from new issues of the National Government in the local market (USD 1,040 million), the increase in the foreign currency holdings of the entities in the BCRA (USD 576 million), purchases of foreign currency in the foreign exchange market by the National Treasury (USD 150 million) and the increase in the price in US dollars of the assets that make up the reserves (USD 32 million). These movements were partially offset by interest and charge payments to the IMF (USD 808 million), the net cancellation of principal and interest to international organizations excluding the IMF (USD 953 million) and net payments made by the BCRA through the SML (USD 61 million).