MercoPress. South Atlantic News Agency

Argentina: Dollar kept climbing on Wednesday and reached 10.45 Pesos

Argentines distrust their currency but love ‘Uncle Sam’

Despite the tax amnesty bill and investment options pledged by the government of President Cristina Fernandez, the dollar kept climbing in Argentina. After breaking the key psychological barrier of 10 Pesos to the dollar on Tuesday, the “blue” dollar which trades on the parallel market climbed again on Wednesday another 37 cents to reach 10.45 Argentine Pesos.

The blue dollar jumped past the key psychological barrier of 10 Pesos on Tuesday in thin trade, reflecting persistent demand for greenbacks amid tough currency controls.

Meanwhile, the official rate remained unchanged at exchange offices in Buenos Aires at Pesos 5.16 (buying price) and Pesos 5.22 (selling price), with the gap between the two markets over 100%.

In a context of high inflation, negative interest rates or other options to defend the value of the Argentine currency, Argentines are increasingly taking refuge in the US dollar. To this must be added an overall feeling of distrust and uncertainty which can have a greater impact that what stats can present.

For foreign investors having to exchange dollars at the official rate of 5.20 Pesos while costs are ruled or influenced by the ‘blue’ dollar which now doubles the price is no attraction. Likewise importers want to speed their overseas purchases and exporters to delay their sales, all of which makes the greenback even scarcer.

On Monday Argentine president Cristina Fernandez ratified the current monetary policy by warning that “those who are pretending to make money with devaluations, will have to wait for another government”.

The market reaction was to see the price of the blue dollar jump 2.13% and break the 10 Pesos psychological barrier. The ‘blue’ dollar has soared 54% since the beginning of the year and the official rate, 6.5%.