"The dollar rose 10.7% in July": the largest exchange rate jump in almost two years and its impact on the economy.

The official dollar closed July at $1.375, reaching a new nominal record. With this increase, the multilateral real exchange rate registered a monthly rise of 10.7% , one of the highest peaks since the end of convertibility. So far this year, it has accumulated a cumulative increase of 23.6% since the end of the exchange rate controls, fueling debates about competitiveness, inflation, and external balance.

According to a report by GMA Capital , this monthly jump places July among the top 10 largest exchange rate corrections since 2003. It is preceded in the ranking by episodes such as June 2018 (+10%) and February 2016 (+10.9%), moments of strong tension in the Argentine exchange market.

" The rebound in the real exchange rate was due to both nominal depreciation and the moderate response of domestic prices so far, " GMA stated. The consulting firm emphasized that the new floating rate regime and growing credibility in the disinflationary process helped curb the immediate inflationary reaction.

This dynamic sets it apart from other crises: in the past, inflation immediately followed the rise of the dollar, negating any improvement in competitiveness. Today, this impact on prices is more limited, at least in the short term.

The biggest immediate beneficiary of the improved real exchange rate is the agricultural export sector. In July alone, the price per ton of soybeans for Argentine producers rose 19.2%, despite the drop in international prices. This improvement is due to both a stronger dollar and lower withholding taxes.

However, doubts remain about the sustainability of this scenario. "In principle, there will be some pass-through, especially in tradable goods," warned GMA. For LCG, " inflation expectations are more anchored, but if the dollar rises again in the coming months, there won't be as much room to absorb the impact without raising prices ."

The recovery in competitiveness could begin to alleviate the external deficit. Except for the extraordinary figure in June—with heavy agricultural sales—the current account has shown deficits since mid-2024. Over the past 12 months, the balance has shown a deficit equivalent to 1.8% of GDP.

" The new exchange rate level will not immediately correct this imbalance, but it could bring the deficit closer to 2% of GDP ," GMA noted. In that case, while it would still be negative, it would reflect a growing economy and reduce the risk of a balance of payments crisis.

One of the side effects of the escalation was the impact on the Central Bank . Since May, the monetary authority has lost nearly $500 billion in the dollar futures market, as a result of its interventions to curb volatility.

Among the factors explaining the dollar's rise in July are the seasonal decline in agricultural sales, the excess in pesos following the dismantling of the LEFI (Financial Service of the Federal Reserve), and the demand for coverage typical during election years.

Ecolatina warned that "the key will be to recalibrate the monetary system to smooth rate volatility and consolidate devaluation expectations." LCG, meanwhile, anticipated that "the dollar should not fall in the coming weeks," unless there is significant intervention or a change in the trend in external supply.

Invecq raised doubts about the exchange rate band ceiling, currently at $1,450. " If the market trusts the system, with such high rates and a new disbursement from the IMF of $2 billion, it shouldn't be touched. But if it happens, will the Central Bank be able to contain the pressure, or will the dynamics intensify? " they asked.

The government is banking on the combination of positive interest rates, fiscal cuts, and IMF signals to maintain the calm exchange rate. However, Argentina's experience requires caution regarding any market euphoria.