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Montevideo, September 18th 2018 - 19:41 UTC

Argentina hikes bank reserves; Peso gains 1.9% vs the dollar and settles at 28.3

Tuesday, July 3rd 2018 - 07:33 UTC
Full article 2 comments
President Mauricio Macri is trying to boost confidence after obtaining a record US$ 50 billion credit line from the IMF in the wake of the currency rout. President Mauricio Macri is trying to boost confidence after obtaining a record US$ 50 billion credit line from the IMF in the wake of the currency rout.
The steps are part of new central bank chief Luis Caputo’s efforts to stem the selloff in the peso, which has tumbled 34% so far this year The steps are part of new central bank chief Luis Caputo’s efforts to stem the selloff in the peso, which has tumbled 34% so far this year
Markets reacted with the Peso gaining 1.9% Monday to 28.3 per dollar for the biggest advance since May 15. Markets reacted with the Peso gaining 1.9% Monday to 28.3 per dollar for the biggest advance since May 15.

Argentina's central bank said on Monday that it hiked bank reserve requirements by 3 percentage points, following a hike of three percentage points on June 18 as monetary policymakers seek to calm inflation and end a run on the peso currency. The Peso gained 1.9% on Monday against the dollar.

 “The increase in reserve requirements today will apply only to pesos reserves and will be added to another increase of 3 percentage points that went into effect on June 18 and to the additional 2 percentage points that will come into effect on July 18,” the statement said.

The measure is expected to absorb 60 billion pesos (US$ 2.1 billion) in liquidity. Policy makers also increased interest rates on local central bank notes known as Lebacs that come due over the next few months to pay yields as high as 52%.

The steps are part of new central bank chief Luis Caputo’s efforts to stem the selloff in the peso, which has tumbled 34% so far this year. President Mauricio Macri is trying to boost confidence after obtaining a record US$ 50 billion credit line from the International Monetary Fund in the wake of the currency rout.

Markets reacted with the Peso gaining 1.9% Monday to 28.3 per dollar for the biggest advance since May 15.

Likewise the Argentine government anticipated it has no plans to add capital controls, and underlined it will borrow mostly in the domestic market until 2020. Treasury Minister Nicolas Dujovne, Finance Secretary Santiago Bausili and Economic Policy Secretary Guido Sandleris made the announcement to investors during a conference call meant to assuage concerns.

They added that Argentina will borrow mostly in the domestic market in 2018 and 2019 and the government will only raise funds abroad in 2019 to pay for US$ 3 billion of maturing debt.

“The most important objective is to regain the confidence of the markets to lower the cost of financing,” Dujovne said during the call. “That’s our No. 1 objective.”

Categories: Economy, Politics, Argentina.

Top Comments

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  • chronic

    Peso is absolutely BOOMING!

    It'll be $0.03 soon.

    Jul 03rd, 2018 - 12:48 pm +1
  • Enrique Massot

    This crisis and its quick deepening is the making of an exclusive group of CEOs who took power by lying to Argentine electors and has been bleeding the country since December 2015.

    So this is not the making of the “Argentines” but that of a team that has been mortgaging the country's long-term future at a crazy pace. The current process should provide some answers to those who wonder why Argentina has been unable to take advantage of its natural resources and educated workforce.

    Same as previous crisis, the main reason is that the ultra wealthy in Argentina have divided loyalties. This was clearly shown last March by Juanjo Aranguren, former Energy minister, who said he was keeping his money abroad because he did not trust Argentina's economy.

    These guys are making money while Argentina sinks.

    https://argentinareports.com/argentinas-energy-minister-admits-he-keeps-his-money-in-offshore-account/

    Jul 04th, 2018 - 04:11 pm -2
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