2022 was the year in which the dollar in Uruguay was pegged to the US currency around the world. The Uruguayan peso was one of the few currencies that strengthened against Dollar in the world, and especially in latin america Even trading at pre-pandemic prices COVID-19,
Thus, the Green Ticket fell 10.35% in the “end-to-end” year (comparing yesterday’s price with the end of 2021), the biggest annual decline since 2009 (when it was down 19.4% over the previous year). had happened). When comparing the average price of the year with the average price of 2021, the US currency fell by 11.81%.
In addition, the dollar ended a streak of four consecutive years of “end-to-end” in the local market.
In pesos, the dollar fell to $4.62 when comparing yesterday’s price with the last trading day of 2021.
For most of 2022, the US currency presented a declining trend against the Uruguayan peso. Of the year’s 12 months, it fell in eight (“end-to-end” compared to the previous month) while it rose in the remaining four.
This trend was evident in the first semester. From January to June, the monthly variations of the currency were all down. To find so many monthly declines in a row, you have to go back to 2016, when the US currency fell for eight consecutive months between March and October.
Then, in the months of July, August and September, the greenback had an “end-to-end” increase, allowing it to recover some ground. These months were followed by two consecutive declines (October and November) which brought depreciation to over 11% for the year. The increase in December managed to reverse this trend only partially.
The decline in the first months of the year was due to commodity prices. Higher raw material prices and a significant increase in exports led to an oversupply of dollars in the market, leading to a fall in the currency’s value.
The monetary policy carried out by the Central Bank (BCU) is another reason why the Uruguayan peso strengthened against the dollar during the year. The BCU maintained the reference interest rate (money price) as a monetary policy instrument without directly intervening in the exchange market. In 2022, the BCU raised the monetary policy rate eight times, from a value of 5.75% at the beginning of the year to 11.50% after yesterday’s increase (see separate note). This meant that the dollar became less attractive to agents (decreased demand), as the return of the Uruguayan peso improved.
The most significant monthly decline in 2022 occurred in February when it fell 3.67% (this was the largest monthly decline in 10 years, falling 5.14% in October 2012). The most notable increase was in July when it increased by 2.69% (highest increase since October 2021).
The lowest daily value of the dollar in years occurred last week, on December 21 it was listed at $38,341 (the lowest since February 20, 2020 when it was listed at $38,254) and the maximum was at the beginning of the year on January 5 at was trading at $44,731.
The US currency rose 1.72% in December. During the first 20 days of the month, changes were almost all down, with negative monthly deposits. Then came four consecutive hikes which managed to reverse the trend. Out of 22 trading sessions, there were 13 in which the dollar traded lower and nine higher.
For its part, the average value of the dollar during the month of December was $39.09, which was 1.65% lower than the November average.
Yesterday, the last trading day of the year, the dollar quoted an average of $40,071, up 1.13% compared to Thursday. The US currency traded between $39.95 and $40.25 the day before, ending the day lower. The closing price increases by 0.4% compared to Thursday.
For the public, on the boards of Banco Repubblica, the dollar rose 10 cents for buys and 20 cents for sales yesterday, closing 2022 at $38.70 and $41.20, respectively. For the year, “end-to-end”, the price drop to the public was $4.80 for buying and $4.70 for selling.
Country risk closes near record low
Country risk aversion as measured through the UBI index compiled by Repubblica AFAP fell 2 units yesterday and closed at 70 basis points, which is close to historical lows. The decline coincided with a decline in both the price of Uruguayan bonds and the value of Treasuries (US Treasury bonds). The UBI declined by 14 basis points in December and fell by 35 units on the year. In addition, the country risk exposure was at a historic low of 68 units on December 28.
In Brazil, the main reference market in exchange affairs, the dollar closed 2022 down by 6.50%. Yesterday’s closing price was 5.2177 riyals, stable compared to Thursday. The dollar fell 1.44% in Brazil in December.
In Argentina, the official dollar rose 0.21% yesterday to close at 177.16 Argentine pesos. In December it increased by 5.91% and in 2022 it increased by 72.47%. Meanwhile, the blue dollar gained 66.4% to end yesterday at 346 Argentine pesos.
Competitiveness with a sharp decline in the month
According to data published yesterday by the Central Bank (BCU), in November the external competitiveness of Uruguayan products, measured in dollars, fell by 2.8% compared to October. This reduction in competition is the fourth in a row and the ninth so far in 2022.
At the inter-annual level, ie when buying with November of the previous year, the real exchange rate (RER) index fell for the ninth month in a row, this time by 12.2%.
The loss of competitiveness in November compared to October, which measures the increase in Uruguayan commodity prices measured in dollars with respect to its main trading partners, has been explained by a decline in the RER against countries considered outside the region. of the field.
Compared to non-regional peers, competitiveness declined by 1.94% in a monthly comparison, the fourth consecutive decline. There was a decline in TCR against USA (-3.03%) and China (-2.76%). These declines are not reversible compared to Italy (+1.32%), the United Kingdom (+1.32%), Spain (+0.7%), Mexico (+0.4%) and Germany (+0.31%).
Year-on-year, ie compared to November 2021, extra-regional competition fell by 18.6%. This is the 10th consecutive month when the index has declined and in 2022 only in January the indicator showed improvement. This loss occurred against all countries outside the region:. China (-24.6%), followed by Spain (-20.22%), United Kingdom (-19.3%), Germany (-17.74%), Italy (-16.45%), United States (-10.77%) and Mexico (- 3.52) %).
When evaluating what happened with respect to sector participants, the TCR fell by 3.75% in November as compared to October (when it had increased by 0.29%). The decline was against two countries, Argentina (-4.33%) and Brazil (-3.03%).
In an inter-annual comparison, sectoral competitiveness fell by 3.73%. This decline occurs after the indicator has presented a correction for four consecutive months. The decrease was mainly due to loss of competitiveness with Brazil (-7.18%), as it was minimal with Argentina (-0.74%).
It should be remembered that the real exchange rate is an indicator that measures the relationship of consumer prices between Uruguayan products, denominated in dollars, and consumer products of the main trading partners, a measure that constitutes one of the main indicators of competitiveness. Is. countries, although there are others that should also be considered when assessing competitiveness in a synthetic manner.