Argentine markets bucked the dismal three-day losing streak on Thursday, amid signs of political compromise and a new central bank measure to prop up the embattled currency.
The peso ended the day around 5% higher at 57.4 pesos per dollar, according to traders, who said the chance to snap up rock-bottom pesos had also contributed to the jump. Argentina’s Merval stock index closed up more than 4%.
There had been few signs of rapprochement between president Mauricio Macri and opposition candidate Alberto Fernandez in the immediate aftermath of the vote, but as markets continued to tumble on Wednesday, they spoke on the phone, agreeing to try to calm volatility. Fernandez later said his economic plans did not contemplate a debt default.
The central bank also announced on Thursday that from Aug. 20 private banks would be barred from having total dollar holdings exceeding 5%, essentially prompting them to sell U.S. currency if their inventory of greenbacks exceeds that level.
The plan would unleash liquidity into the market without the central bank having to tap its reserves in dollar auctions. Sources said it was likely banks had already started selling dollars to comply.
“The measure adopted by the central bank seems to have had an effect... and managed to slowly cut the successive rises in the value of the dollar,” said Gustavo Quintana of brokerage PR Corredores de Cambio.
Thursday was the first day this week that the central bank did not undertake dollar auctions from its own reserves to prop up the peso. Since Sunday’s vote, the central bank has auctioned a total of US$ 503 million.
Brazil’s Economy Minister Paulo Guedes said on Thursday that his country would pull out of the Mercosur trade bloc if Fernandez became president and closed Argentina’s economy. Fernandez on Monday dubbed Brazil’s far-right President Jair Bolsonaro “racist, misogynist and violent.”