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Montevideo, September 20th 2018 - 18:54 UTC

Lack of investor confidence sees the Argentine Peso fall 3.11% against the dollar

Thursday, May 3rd 2018 - 08:39 UTC
Full article 10 comments
The central bank sold about US$ 400 million in the foreign exchange market as of early Wednesday afternoon, traders said The central bank sold about US$ 400 million in the foreign exchange market as of early Wednesday afternoon, traders said
Despite President Mauricio Macri’s success in midterm elections and congress, investors have recently become more aware of the country’s vulnerabilities. Despite President Mauricio Macri’s success in midterm elections and congress, investors have recently become more aware of the country’s vulnerabilities.

Argentina’s peso currency closed down 3.11% on Wednesday at an all-time low of 21.2 per U.S. dollar, even as the central bank continued selling dollars to try to halt the slide of the local currency, traders said. The currency’s sustained weakening showed a lack of investor confidence in Latin America’s third largest economy, which is blighted by one of the world’s highest inflation rates.

The central bank sold about US$ 400 million in the foreign exchange market as of early afternoon, traders said, an amount that was likely to increase when an official count is provided at the end of the day.

The bank said it sold a total US$ 3.7 billion in the last three days of last week. The action culminated on Friday in a surprise hike of the bank’s key interest rate to 30.25% from 27.25%.

Argentina’s local stock index rose 77% last year and investors even gobbled up a 100-year bond as President Mauricio Macri’s strong performance in mid-term elections spurred hopes for more market friendly reforms. But investors have more recently woken up to the country’s vulnerabilities.

“The forces driving the peso lower are unlikely to abate,” Capital Economics said in a report on Wednesday, pointing to a current account deficit equivalent to 5 percent of gross domestic product as well as high inflation.

Local brokerage Delphos Investment said in a report the recent pace of dollar selling was not sustainable. It also said the implementation of a capital gains tax for foreign investors last month had led to a decrease in foreign capital entering Argentine markets.

Consumer prices in Argentina rose 2.3% in March, slightly down from the 2.4% increase in February. Twelve-month inflation was 25.4%, the same level as February.

Categories: Economy, Argentina.

Top Comments

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  • The Voice

    I Think I remember the same sort of thing during KFC's reign, only worse with $ pegs that didnt work. Whats the Peronist alternative, more corruption, nepotism and isolation?

    May 03rd, 2018 - 08:11 pm +4
  • Marti Llazo

    “It Might Be Time To Get Out Of Argentina” (Forbes news note, as advice to investors)

    May 03rd, 2018 - 02:44 pm +2
  • Zaphod Beeblebrox

    Reekie,

    Following your airliner analogy. The airliner was flying at full speed towards the ground under CFK but her approach was to increase the thrust, steepen the downward angle of the plane and jettison the parachutes while telling everyone on board that all was well and providing them with beer and sausage sandwiches.

    What Macri has done has slowed the planes speed down, reduced its angle of approach to the ground and changed the plane's direction. In doing so the plane has hit a bit of turbulence. Will the plane still crash? We don't know, but wouldn't you prefer to have a pilot who was taking some correct actions rather than having one who was taking all of the worst possible actions?

    Meanwhile some passengers on board are complaining that the plane has changed direction, they aren't getting any beer any more and there's some turbulence. So they are advocating a return to the previous pilot because they'd rather have some beer in their hands as the plane hits the ground.

    Also, Reekie is now advocating the same reversion back to the original pilot even though he himself is now safe on the ground having jumped out of the airplane some time previous to CFK starting the plane's descent using his parachute. He calls his parachute “Canada”.

    May 04th, 2018 - 05:54 pm +1
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