MercoPress. South Atlantic News Agency

US dollar with no cap in Argentina: climbs 3.4% in a single day

Meanwhile the parallel dollar also established a new record at 12.15 Pesos

The US dollar in the Argentine official market on Wednesday soared 23 cents to 7.125 Pesos, establishing a new record in the midst of uncertainty and frantic trading. The last time the greenback price climbed 3.4% in a single day was back in April 2002. Since the beginning of the year the Argentine peso has plunged 9% against the dollar and a year ago the dollar stood at 5 Argentine Pesos.

 There was a peak of demand a few minutes before trading closing time when it became evident that the Argentine central bank had remained mostly absent from trading on Wednesday contrary to what has been its latest policy of daily interventions to ease the rise.

This which was interpreted by market operators as a new strategy of the central bank could put even more pressure on the greenback on Thursday as demand of dollars for imports is expected to increase, while on the supply side, exporters have remained absent since all indicates that sitting on the dollars is better business than selling them.

This leaves the central bank and other government banks as the sole providers of an extremely dollar thirsty market which also includes tourists planning to travel overseas and simple speculators that operate mainly in the parallel or blue market.

As a consequence the central bank international reserves continue to dwindle and were reported to stand at below 29.5 billion dollars after breaking through the 30bn milestone it was trying to hold on earlier in the week. On Tuesday the bank lost 200 million dollars in reserves.

The government meanwhile tightened controls on purchases from abroad via the Internet, already subject to a 50% tax if worth 25 dollars or more. Now, Argentines will be limited to just two online, overseas purchases a year, each of 25 or less. The measures were the latest in a series aimed at halting capital flight.

According to the head of the country's Chamber of Electronic Commerce, Patricia Jebsen, Internet transactions accounted for 13.5% of foreign retail purchases by Argentines last year, up from 7.5% the previous year. A larger portion were done by credit cards, which get hit with a 35% tax.

With Argentina cut off from international money markets because of its pending litigation cases with hedge funds dating back to the 2001/02 default, the country can only count with the trade surplus and some limited credit from multilateral organizations. But the major influx of dollars does not come until the summer crops are in (soy and maize) in March, April.

Meantime in the blue market the price of the dollar again soared on Wednesday, 29 cents and traded at 12.10 and 12.15 Pesos, purchase and sale. This established a new record breaking last week's 11.95 Pesos.

According to market operators the new values were propped not only by tourists for trips overseas but also by speculative purchases since there is no end in sight for the ongoing short supply of dollars.