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Pre-election nervousness ravaged Argentina’s currency markets on Friday, weakening the peso in parallel exchange rates and skyrocketing the country’s “country risk†rate.
The “blue dollar” closed the week at a record high, up four pesos yesterday to close at 195 to sell, 191 to buy.
In official markets, the exchange rate stood at 104.94 pesos per greenback, limited by long-standing restrictions on the purchase of foreign currency.
The peso fell 4.36 percent this week, with a spread of 96.2 percent between it and the formal rate, according to Reuters.
During the previous four days, the so-called ‘dollar blue‘jumped nearly 10 pesos, widening the gap with the official exchange rate and putting pressure on inflation.
The informal foreign exchange market, where the blue dollar is traded, has a low trading volume but serves as a sensitive indicator of market expectations.
“The mistrust does not stop. There are excess pesos and there is nowhere to buy formal dollars, â€said financial adviser Salvador Di Stefano. Perfil Friday.
Argentina’s “country risk” rate, a measure tracked by JP Morgan, hit a new high in the wake of the news, hitting 1,672 points – exceeding its previous high reached in March earlier this year.
Turbulence
The turmoil in the currency markets reflects the uncertainty felt by investors as the upcoming midterm elections approach. Argentina is due to go to the polls on November 14, with half of the lower house of the Chamber of Deputies and one-third of the Senate to be renewed. Analysts have speculated a lot about a possible devaluation of the peso after the election, which could see the government lose its majority in the upper house.
The government of President Alberto Fernándeza has implemented exchange controls since 2019, with increasingly restrictive measures introduced to limit purchases of foreign currency.
Argentina’s economy, in recession since 2018, is now rebounding after a devastating 9.9% drop in gross domestic product last year, a collapse caused in large part by the coronavirus pandemic.
However, runaway inflation continues to undermine purchasing power. Consumer prices rose 3.5% in September, higher than expected, with the annual rate now standing at 52.5%. Prices rose 37% in the first nine months of the year.
Earlier this week, the government ordered a 90-day price freeze on more than 1,400 household items to protect citizens, a measure strongly rejected by the opposition and several business leaders.
According to the Central Bank’s latest market estimate survey, the country’s leading consulting firms and specialist economists estimate inflation will hit 48.2 percent in 2021.
Bank of America forecast on Friday that Argentina’s annual inflation rate would reach around 50 percent, with GDP expected to grow 7.3 percent by the end of the year. He said his forecast was “based on an agreement with the IMF finalized by the end of January.
– SCHEDULES / AFP / NA
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