Argentine regulators moved to curb demand for dollars in the financial market, the latest government effort to prevent the peso weakening beyond its trading band.
The country’s National Securities Commission, or CNV, issued a fresh interpretation of an existing rule on Friday that bans brokers from selling local dollar-denominated instruments if they maintain positions in repos or other short-term loans in pesos in the local market.
The norm, which effectively blocks market participants from buying dollars using short-term peso financing, is another example of how the libertarian administration of President Javier Milei is willing to intervene in the market to defend the peso. It has already stepped up the purchase of dollar futures and moved to restrict liquidity in the market. Still, the peso edged closer to the limit of its trading band on Monday.
“This clearly constitutes a tightening of exchange controls,” Juan Manuel Truffa, an economist at Buenos Aires-based consulting firm Outlier, wrote in a note.
After the announcement triggered market jitters, the CNV issued another interpretation to allow market agents to trade dollar instruments during the day, as long as their position is neutral by the close of trading.
“By preventing brokers from building up net FX positions if they have outstanding repo loans, the regulator is aiming at a sands-in-the-wheel approach on dollar demand,” said Ramiro Blazquez, a strategist at StoneX.
The exchange rate is now dangerously close to the upper level of the band, closing on Monday at 1,467 pesos per dollar. If it breaches it, the Central Bank is allowed to intervene in the market.
In the meantime, political jitters around Milei’s political support ahead of key midterm elections in October continue to weigh on Argentine assets. Dollar notes dropped more than a cent on Monday, underperforming emerging-market peers for a second consecutive session. Bonds maturing in 2035 were down to levels not seen in almost a year, trading below 53 cents on the dollar.
by Nicolle Yapur & Ignacio Olivera Doll, Bloomberg
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