MercoPress. South Atlantic News Agency

US dollar does not soar as expected following Argentina's elections results

Analysts foresee a change in the rhythm of the depreciation of the peso once the BCRA can no longer afford to keep its current policy active.

Contrary to expectations, the unofficial exchange rate between the Argentine peso and the US dollar remained somewhat stable Monday following the ruling party's overall loss at Sunday's mid-term elections.

After trading at AR $ 207 / US $ 1 last Thursday when tensions were boiling with the impending elections, Monday's reports recorded it at AR $ 201 / US $ 1, according to Infobae.

Meanwhile, the official quotation stood at AR $ 100.31 / US $ 1, for a gap of 100.4% between the two variations, in a country with several values for foreign currency. On Thursday the gap was 107%.

In the days leading up to the mid-term elections, Argentina's Central Bank (BCRA) had poured US dollars into the market to keep the devaluation of the peso at a gradual pace. Just last Friday some US $ 290 million had been injected into the interbank market, where foreign trade operations are handled. The Central Bank has reportedly disbursed US $ 659 million so far this month. But the Central Bank shed only US $ 35 million Monday to sustain demand.

“The exchange rate is already unfolded, there is the official one and there are 20 parallel ones. The government regulates and intervenes arbitrarily. Once you define that you are not going to arbitrarily intervene in a market, you can have a financial market but I don't see it as a special solution,” economist Gabriel Rubinstein explained.

Due to these movements, the BCRA's gross reserves are at their lowest level since last August 20, reaching US $ 42.6 billion Friday.

The “blue” (unofficial) dollar has gone from AR $ 180 at the time of Sept. 12's Mandatory, Open and Simultaneous and Primary (PASO) elections to barely over AR $ 200 in the aftermath of Sunday's mid-term elections.

The US dollar traded early Monday at AR $ 196.5 buyer / AR $ 199.5 seller. It threatened to go up sharply but soon it lost strength and settled for AR $ 201.

Market analysts, however, foresee a change in the rhythm of the depreciation of the peso once the BCRA can no longer afford to keep its current policy active.