May will be crucial for the dollar: strong foreign currency inflows, demand pressure, and the band's floor at stake.

May has begun, and for Javier Milei 's government , it won't be just another month with the dollar. For seasonal reasons, this period concentrates foreign currency inflows from the countryside and typically shows the highest trade surplus of the year. In 2025, the outlook becomes more complex with a new floating exchange rate scheme and revitalized demand that could work against the Central Bank .

The central objective of the official strategy is clear: take advantage of the increased supply of dollars to force the wholesale exchange rate below the floor of the band, currently around $1,000, and thus enable the Central Bank to purchase foreign currency without having to sterilize pesos.

Since mid-April, the government eliminated the "dollar blend" mechanism, which allowed 20% of exports to be settled through stock market transactions. This decision led to an increase in wholesale trading volume, with transactions exceeding USD 800 million per day.

At the same time, the Executive Branch established a free-floating regime within a defined range of $1,000 and $1,400. Within these limits, the Central Bank will not intervene. Currently, the wholesale dollar hovers around $1.170, so to activate official purchases, it would need to fall by more than $170 in the short term.

While agricultural supply is guaranteed until July, demand appears to be the key factor that could sustain the exchange rate at current levels. Importing companies and savers have begun to take advantage of the dollar at $1,200, with a nearly zero exchange rate gap, limiting the expected decline.

According to economist Gustavo Ber, "May begins with a scenario that could extend the recent stability thanks to increased agricultural supply, real investment, and carry trade, while private supply grows due to monthly commitments." However, demand could offset this influx if it strengthens.

Since the end of the currency controls, private sector dollar deposits have continued to grow. As of April 28, they reached USD 30.183 billion, an increase of nearly USD 1.135 billion since mid-April.

The habit of dollarization remains strong among Argentines, albeit with a new logic. "Leaving dollars alone is no longer enough: the search for accounts that pay balances in hard currency is growing," noted a report by IOL InvertirOnline.

Along these lines, Economy Minister Luis Caputo announced that the government will launch measures to encourage the daily use of dollars: "We're going to announce something that will be surprising; dollars will circulate more," he told business leaders.

Despite the improved external position, the national Treasury faces significant commitments. This week, it must pay USD 620 million to the IMF in interest, part of a total of USD 2 billion to be paid this year. There are also maturities scheduled for August (USD 861 million) and November (USD 883 million).

These payments were included in the USD 12 billion disbursement the Fund granted in April, which entered the BCRA's reserves on the 15th of that month. During the remainder of the year, the IMF will release two additional tranches: USD 2 billion in June and USD 1 billion in December.

"April was marked by the agreement with the IMF, the inflow of foreign currency, and the lifting of the exchange rate controls," summarized Ignacio Morales of Wise Capital.