Dollar, Rates, and Inflation: Why September Could Be a Key Month in This Race

The fact that during this week the official dollar has finally managed to consolidate above the barrier of $1,500 has raised a series of questions among market analysts about what could happen in September, not only for the North American currency but also for rates and inflation.

In a conversation with Ámbito, economist Federico Glustein predicted that tension will remain in the coming month. "What we are seeing a priori is a surpassing of the estimated value in the last Market Expectations Survey (REM), which placed the price at around $1,520. We are already close," he stated.

For this reason, he considered that during September exchange rate tension could place the quotation between $1,550 and $1,570. "Obviously, this will greatly influence the rate, since nowadays the real yield is negative for many instruments," he added.

With greater optimism, economist and founding partner of the ACM consultancy, Joaquín Alvaredo, pointed out to this medium "signals of certain stability" in the exchange rate for the next month. "It seems that the authorities' goal is for the exchange rate not to vary too much or too quickly," he suggested.

Nonetheless, he noted that, "implicitly," with the agreement with the International Monetary Fund (IMF) "there is an intention for the peso not to appreciate in real terms".

On its part, in one of its latest reports, Delphos Investment stated that "the most seasonally challenging months for the exchange rate are behind us, characterized by a lower supply of currencies" and that "a period begins in which we expect greater liquidation".

A favorable factor they mentioned is "the lower pressure from profit remittances", considering that the BCRA reported that companies sent the highest amount of dividends abroad since 2010. "After reaching a peak of u$s1,015 million in June, remittances were reduced to about u$s500 million in July, so we expect this source of dollar demand to continue losing intensity".

Another positive element, according to Delphos, is that the Treasury "retains margin to intervene and contain potential pressures" on the dollar through the futures market, "given that its short position remains at low levels compared to what has been observed so far this year".

Glustein foresees a positive real rate starting in September, "or at least one that matches the inflation of August, which will be lower than that of July." According to his estimates, the CPI for this month would be around "between 1.7% and 1.9%".

Regarding September, he argued that "if there is no pass-through of dollar prices to inflation, this downward trend will likely continue," around 1.5%-1.7%.

On his part, Alvaredo argued that, after the episodes of tension in August, "as long as the accumulation of reserves by the BCRA is maintained and the treasury does not absorb liquidity beyond the maturities, the rate should tend to stabilize at the levels of June and July."

Regarding inflation, his estimates were similar to those of Glustein. He recalled that in the July result, seasonal issues played a significant role, and asserted that without it, the CPI would have measured around 1.8%.

"August tends to be a month where that seasonal factor influences less", he elaborated. And he anticipated that his estimates range between 1.7% and 1.9% monthly, while for September that number would be between 1.5% and 1.7%.

At Delphos, they expect "a more marked deceleration in the coming months, due to the price of meat showing moderation over the last five months." Additionally, if the de-escalation of the Middle East conflict continues and the recent drop in Brent occurs, "fuels should lose impact on price dynamics".

In parallel, there would be "a lower seasonal demand for energy, both electricity and gas, which should also contribute to moderating inflationary pressures." In this context, they expect that inflation in the coming months could be around 1.7% monthly.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.