MercoPress. South Atlantic News Agency

Argentine peso looses ground for third day in a row

The Argentine peso slid for the third day in a row, hitting four-year lows against the US dollar in the range of 3.15/3.20 while the stock market recovered at the end of the day after having lost ground earlier.

Government bonds experienced a bad day on the local market and short-term interbank lending rates shot up as banks sought pesos on loan to convert to dollars. The rise in the US dollar is generating growing fears of its impact in Argentine domestic prices and overall inflation given the global bull market for commodities. This is particularly true for beef which is staple diet for Argentines and is currently under a limited exports ban to satisfy the domestic market. "The foreign exchange market, the money market, government debt and stocks were all out of control â€" as in other times in the past â€" as traders lost confidence as the Central Bank abruptly stopped controlling the value of the dollar," said Fernando Izzo, an analyst with the ABC Mercado de Cambio foreign exchange house. Izzo said there seemed to have been a change in policy by the Central Bank since the economy minister was replaced last week. Until recently the Central Bank intervened almost daily in the foreign exchange market to keep the peso at around 3.12 per dollar. Miguel Peirano was named economy minister last week to replace Felisa Miceli, who resigned facing an investigation into 60,000 dollars in cash found in a bag in her office. "The ones having a party were exporters," Izzo said. Soybean prices rose just as export dollars fetched more pesos at home. With agricultural exports booming and flooding the country with greenbacks, usually dollars chase pesos and the Central Bank soaks up dollars to keep the local currency from appreciating. But the normal scenario was reversed this week, partly due to the end of the soy and corn harvests, which lessened the usual inflow of dollars. Investors liquidated assets and rushed to buy dollars before the peso declined further. But economist Camilo Tiscornia believes the Argentine Central Bank won't allow the US dollar to escape. "I doubt they will let it go beyond 3.20 to the US dollar. This is the maximum price estimated in the budget, but they might take advantage to let the high exchange remain at 3.20", said Tiscornia. Former Central Bank president Aldo Pignanelli said the rise in the US dollar is part of the "floating exchange rate" system and "the government feels comfortable with a high exchange rate".