The Argentine Peso reacted strongly against the US dollar on Thursday following on an abundant private supply of greenbacks to satisfy demand, which kept the Central Bank out of the market for the first time since the beginning of the month. The dollar fell 2.8% and ended trading below 39 Pesos.
This was attributed to the successful sale by the central bank on Wednesday of short term bonds at a 50% rate which absorbed most of the liquidity in the market. Actually in the wholesale market the dollar price ended at 38.20 Pesos after falling as low as 37.60 Pesos. Overall operations with dollars dropped 30% to US$ 484 million.
Apparently some US$ 950 million moved into Argentina to invest in the short term papers paying 50% interest, plus others went shopping for assets in pesos in the local stock market.
This was a complete reversal from the first three days of the week when the Central bank had to support the Peso from further depreciation against the greenback by pumping some US$ 750 million of its reserves.
The central bank has managed to dry the market of liquidity thus forcing the sale of dollars for any investment or need to honor in Pesos, according to Money Exchange desks in Buenos Aires financial center.
This besides the latest messages from the IMF and Argentine officials indicating that the multilateral organization is willing to finance an additional US$ 20bn to the original US$ 50bn. In effect the latest statements from the IMF spokesperson are that important progress has been achieved in the ongoing talks with the Argentine government.