Currency turbulence continues in lead-up to midterms

Argentina's currency fell sharply on the parallel market on Wednesday, with the so-called 'blue dollar' selling at an all-time high of 205 pesos, just five days ahead of legislative elections in which Alberto Fernandez's government could lose control of Congress.

Meanwhile, on the official market, the greenback traded at 105.67 pesos to the dollar, within the framework of tight restrictions on the purchase of foreign currency.

In the past month, the 'dolár blue' has jumped 20 pesos, increasing the gap between it and the official rate to more than 100 percent.

The informal market, where the 'blue' dollar is traded, has a low volume of operations but works as a sensitive indicator of expectations. This in turn puts pressure on inflation, the main concern of Argentines who are beginning to emerge from the recession that has dragged on since 2018 and was exacerbated by the Covid-19 pandemic.

At the beginning of 2021, the 'blue; was selling at 165 pesos. In a year, the peso has depreciated almost 20 percent in the parallel market. Inflation, meanwhile, has risen 37 percent between January and September.

Currency controls have been in place since 2019, amid a shortage of dollars and other foreign currencies.

Argentina will hold legislative elections on 14 November, in which half of the Chamber of Deputies and a third of the Senate will be renewed.

Analysts are speculating about the possibility of a devaluation after the upcoming elections, a hypothesis repeatedly rejected by Economy Minister Martín Guzmán.

A devaluation of the currency would mean a new blow to Argentines' already very thin pockets. According to the latest Central Bank survey, the main consulting firms estimated at the end of October that inflation would reach 50.3 per cent in 2021.

The Frente de Todos government has launched a series of measures in recent weeks aimed at reversing the setback it suffered in the September primaries, but the polls are not working in their favour.