He dollar curler returned to the Argentine financial market. For several weeks, local traders took advantage of a difference between quotes to make quick profits with currencies. The scheme was based on an arbitrage between exchange rates that allowed almost instantaneous movements.
The mechanism offered striking returns in a very short time. Yields reached up to 4% in a matter of hoursa figure difficult to achieve with traditional instruments.
The problem escalated when the circuit began to repeat itself massively and began to generate distortions in the market, in addition to putting pressure on the Central Bank’s reserves.
The Government decided to act quickly. The Central Bank applied a new regulation to nip this operation in the bud.
How exactly the dollar curl worked
The mechanics were based on exploiting the gap between two financial quotes: the MEP dollar and the cash with settlement (CCL). This difference enabled a classic arbitrage of the Argentine exchange market.
The operation was to buy dollars in one market and sell them in another with a more favorable quote. All through vouchers that allowed round trip with foreign currency.
Traders entered the market, captured the gap and exited on the same day. In some cases, they closed the circuit in a few hours. The profit did not depend on the rise or fall of the dollar, but on the difference between the two prices.
Although the operation did not violate any explicit rule, its massive repetition began to attract attention. The gap between MEP and CCL widened in recent weeks, which made the business more attractive.
In a context of exchange restrictions still in force, any inconsistency between quotes quickly becomes an arbitrage opportunity.
Why the Central Bank considered it a problem
The issue wasn’t just some traders making money. This circuit had a direct impact on the coffers of the Central Bank, since it involved dollar movements that ended up putting pressure on reserves.
Every time someone did the loop, it drained currency from the system. And in a year where the Government seeks to accumulate dollars to strengthen the external position, any leak set off alarms.
Furthermore, the context heightened the problem. Exchange restrictions are still active. The gap between quotes, which had remained low for months, grew again.
Arbitration was fed by that difference and, at the same time, deepened it. A vicious circle that complicated the official objective of exchange rate stability.
The economic team evaluated that maintaining this scheme generated more costs than benefits. The decision was to intervene.
What measure did the BCRA apply to stop the currency?
To cut the circuit, the Central Bank moved forward with a new specific regulation. The rule limits the possibility of carrying out chained operations purchase and sale of financial dollars.
The central point is a restriction for those who transfer currency abroad. These operators must agree not to operate with certain financial instruments in foreign currency for a certain period.
This breaks the logic of the immediate round trip that made the roller profitable, because it prevents closing the circuit on the same day.
From the measurement, desks that operate with bonds can no longer enter and exit the market with the same ease. The possibility of capturing the difference between quotes was blocked.
Regulation aims directly at the core of the business: speed. Without quick moves, arbitrage becomes unattractive.
What effect did the measure have on the market?
The impact was immediate. On its first day, the measure coincided with a notable result in the purchase of reserves by the Central Bank.
The BCRA achieved one of the highest levels of foreign currency acquisition in the last two years. The data was highlighted by official sources as evidence of the success of the intervention.
The Government’s objective is clear: reduce speculative maneuvers that take advantage of inconsistencies in the system and, at the same time, strengthen the accumulation of dollars.
This episode once again shows how the differences between different exchange rates generate financial opportunities that the market quickly exploits. Every time a relevant gap appears, strategies emerge to capitalize on it.
On the other side, The Government responds by adjusting regulations to avoid collateral effects on reserves and the stability of the system. A pulse that is repeated every time the Argentine exchange market finds a loophole to operate.
