Argentina has drawn a line in the sand for the peso at 55 to the dollar – and it seems to be holding, for now.
Dollar auctions by the Central Bank and the Economy Ministry have kept the peso near the same level all week, even as a debate rages about a possible sovereign default and currency controls. The peso closed at 55.09 per dollar, little changed from the previous day.
“It would seem that the level at which they want to contain the exchange rate is approximately 55/USD,“ said Juan José Ciro, chief financial officer at Banco CMF. Wednesday’s “tenders seem to reflect exactly that.”
The Central Bank sold US$94 million and the Economy Ministry another US$60 million in the foreign exchange market Wednesday, while new limits on holdings of dollars by commercial banks limited demand.
The signal seems to have been strong enough to curb dollar demand on Thursday, with the peso remaining stable without further dollar sales by the central bank.
When the exchange rate is well below 55, the authorities don’t use tenders to sell dollars and “prefer to store ammunition for when they need it at higher levels,“ Ciro said. The currency has fallen 32 percent this year, the worst performance in emerging markets tracked by Bloomberg.