On the first day of the month, the Central Bank resumed purchases in the market and kept USD 145 million

Reserves rebounded after five consecutive falls.

The amount traded in the cash segment of the wholesale market fell by around USD 88.5 million or 18.8% to USD 383.3 million on Thursday. The BCRA’s purchases for USD 145 million stood out, interrupting a series of six consecutive trading sessions with a negative balance due to foreign exchange intervention.

In this sense, the July balance resulted in a seller of USD 181 million for the Central Bank, as had already occurred in June for USD 47 million. In addition, July was the most negative result for official foreign exchange intervention since October 2023 (-USD 227 million).

Meanwhile, international reserves grew by USD 666 million on the day, to 27.065 billion dollars. “Reserves rose due to seasonal flows related to the beginning of the month,” BCRA sources told Infobae. Due to this strictly accounting factor, “they always fall at the end of the month and these flows are offset” with the beginning of the following month’s fiscal year, they added. It should be noted that yesterday, the last day of July, reserves fell by 593 million dollars.

This variation in reserves is linked to the global foreign currency position (PGNME) that banks must comply with. If the entities have a surplus of their own dollars in their portfolio – that is, above what is allowed by the regulations – they withdraw the dollars from the system to meet the quota at the end of the monthly financial year. And they re-enter the foreign currency at the beginning of the month without violating the regulations.

Since the movement affects the stock of private deposits that make up reserves, gross reserves for this concept also fall. And they recover in the same proportion on the first business day of the following month. It should be noted that this refers to the banks’ own dollars and is not linked to the holding of foreign currency belonging to their clients.

It is worth remembering that on Wednesday the stock of gross reserves ended at USD 26.399 billion, a six-month low, down from USD 26.392 billion on February 6. Throughout July, the gross stock of these assets fell by USD 2.617 billion or 9 percent.

The Central Bank has accumulated net purchases in the foreign exchange market for USD 17,203 million since December 11 of last year, when Javier Milei’s government took office. At the same time, the stock of international reserves improved by USD 5,856 million or 27.6%, from USD 21,209 million on December 7, 2023.

The official purchase of USD 145 million in the cash segment implied a monetary expansion of $135,285 million at a wholesale exchange rate of 933 pesos. With the validity of the new monetary scheme announced on July 13, the Central Bank maintains a net absorption of pesos for its purchases and sales in the exchange market, since it has sterilized about $245,006 million since Monday, July 15. This is an overfulfillment of the strict “zero emission” scheme to which the Government committed. In addition, the Government announced the sterilization of pesos issued by the purchase of reserves in the MLC since April 30 ($2.4 billion).

This Thursday the The Argentine Chamber of the Oil Industry (CIARA) and the Cereal Exporters Center (CEC), entities that represent 48% of Argentine exports, reported that during the month of July, companies in the sector settled the sum of 2.616 billion dollars.

Regarding agro-industrial exports, this liquidation implied an increase of 35.8% compared to the same month in 2023, as well as an improvement of 32.3% compared to June 2024. These figures confirm that the liquidation of the field maintains a good pace. When comparing the first seven months of this year with the previous year, the increase in exports of grains and industrial derivatives increased by 5.2% year-on-year.

“July was the best month of the year in terms of foreign currency earnings from agricultural exports,” explained CIARA-CEC. However, they recalled that “grain exports continue to operate with high levels of idle capacity, as does the oil industry, which is suffering from permanent negative margins.”

Regarding the pace of foreign currency settlement, exporters recalled that “most of the foreign currency inflows in this sector occur well in advance of export, with a lead time of around 30 days in the case of grain exports and up to 90 days in the case of protein oils and flours. This lead time also depends on the time of the campaign and the grain in question, so there are no delays in the settlement of foreign currency.”