Dollar at $1800? Why the Government's Figure Isn't 'Far-fetched' but Caused Market Stir

Argentina's presidential spokesperson, Adrián Ravier, ignited market concern by suggesting the official dollar could reach 1800 pesos in the coming months. This statement came as the exchange rate saw an upward trend in July, with the wholesale official dollar closing at a nominal historic high of 1496.34 pesos on Friday.

Although Ravier later retracted his statement, saying he "made a mistake" and dismissing the possibility of currency tension similar to past episodes in Argentina, his initial remark reverberated through the market. If the dollar were to hit 1800 pesos by year-end, it would represent a nearly 20.3% increase, significantly exceeding the inflation expected for the next five months. Salvador Vitelli, head of research at Romano Group, noted that this scenario would deviate from the logic predicted by market expectations surveys (REM) and future dollar markets, which anticipate the 1800 peso mark being reached later.

Vitelli added that even at 1800 pesos, the dollar would still fall within the Central Bank's (BCRA) established currency bands, meaning the monetary authority would not need to intervene by selling dollars. Andrés Reschini, head of F2 Soluciones Financieras, echoed this sentiment, stating that such a value would be "admissible." He cautioned, however, that a 20% devaluation over five months could potentially accelerate inflation, particularly if social support for the government deteriorates or the international scenario becomes more adverse closer to the elections.

Historically, the real multilateral exchange rate index (ITCRM) is currently at its lowest level since 2017. While some economists point to an overvalued peso, Ravier described it as "difficult to say" whether this is truly the case. He asserted that any necessary currency correction would be "minimal" and unlikely to have a significant impact.