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ECONOMY | 28-08-2019 15:57

Peso slumps to 60 per dollar, country risk rating hits 14-year high

Currency has slumped against the dollar again over the last few days, just as tensions between the government and the opposition have picked up.

Amid continued political and financial uncertainty, the peso closed more than two percent down at 60.10 against the dollar this afternoon in banks and agencies in the City of Buenos Aires.

The depreciation prompted an early intervention from the Central Bank, which sold US$367 million in seven auctions. The Treasury sold an additional US$60 million in two auctions, financial outlets reported.

In Banco Nación, the greenback was selling at 60 pesos.

The peso remains within the spread established by new Finance Minister Hernán Lacunza, however, of between 57 and 62 pesos.

The Central Bank has now sold US$1.428 billion since the PASO primaries, Infobae reported, with the Treasury have shipped US$626 million since August 12. The peso is down more than 20 percent against the dollar since the election.

Central Bank authorities said in a statement to the press Wednesday that it would limit financing in pesos for major exporters, in a bid to strengthen the currency by forcing firms to sell dollars in order to fund operations.

Meanwhile, country risk soared as high as 2,125 points before dropping slightly to close to 2,112. That was its highest peak in 14 years, according to JP Morgan.

IMF tension

Argentina's national currency has slumped against the dollar again over the last few days, just as tensions between the government and the opposition have picked up.

Bond spreads widened to the most in 14 years on Tuesday after opposition leader Alberto Fernández criticised the debt-laden country’s accord with the International Monetary Fund. The Frente de Todos leader said much of the IMF loan had been wasted on financing capital flight out of the country.

A technical team from the IMF is currently in Buenos Aires to decide whether to give out the next disbursement of a US$56-billion loan deal. In a statement following a meeting with IMF officials, Fernández said he agreed with the objectives of the IMF deal, but added that the IMF and the current government generated the current crisis and are now responsible for reversing the “social catastrophe.”

“Alberto Fernández’s statements after the IMF meeting created noise,” said Joaquín González Gale, FX trader at INTL FCStone in Buenos Aires. “Anything he says is blown out of proportion.“

If the IMF decides to give the next disbursement, that would reassure the market and lead the interest rate on short-term dollar notes known as Letes to drop sharply, González Gale said. Until then, traders worry about what the contingency plan might be.

“The problem is now banks are wondering what will happen if the Treasury doesn’t receive these dollars” from the IMF, he said.

The government is selling 35-day and 140-day Letes today, as well as 35-day peso-denominated Lecaps on August 28.

– TIMES/BLOOMBERG/NA

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