Dollar recedes to 28.41 as Lebacs expiry tests new Central Bank chief Caputo

Luis Caputo faces his first major test as Argentina’s new Central Bank Governor with the expiry today of 53 billion pesos (US$ 19.2 billion) worth of short-term Lebac notes.

Under the management of Caputo's predecessor Federico Sturzenegger the Bank had managed to reduce the expiry from 66 billion pesos.

Observers believe the market will demand an interest rate of 43.5 percent in order to roll over the bonds.

A rising dollar has pushed interest rates on 30-day Lebac notes to 44 percent and 38.50 percent on 159-day notes.

The dollar dropped 45 cents on Monday to close at 28.41 pesos.

ECONOMIC WOES

President Mauricio Macri’s government has struggled to halt inflation, which soared to 25 percent in 2017.

On Sunday, Macri said his coalition’s attempts to tackle inflation have so far “failed” because of the unexpected impact of increased utility and transports prices, rising international petrol prices and unexpected changes in the international economy.

“We needed a path toward lower inflation but nobody understands what it means to restructure public service costs and the impact these [changes] have on inflation”, he told star journalist Jorge Lanata on Sunday's Periodismo para todos.

The president also defended his government’s decision to sign a deal with the International Monetary Fund (IMF) saying “gradualism is the way forward in caring for the most vulnerable”, however, “we must know look at less gradualism so that we do not deteriorate the world’s confidence”.

2019

Analysts said resorting to a dig-out from the IMF will hurt the 59-year-old’s appeal to the electorate a year ahead of elections in the South American country.

The loans at the time were needed after the country suffered an economic crisis in 2001 that sparked the downfall of four presidents and default on US$100 billion in foreign debt.