Argentina’s parallel exchange rate weakened beyond a key threshold on Friday, as demand for hard currency assets increased ahead of the upcoming midterm elections in November.
The exchange rate on blue chip swaps, derived from buying stocks locally and then selling them overseas for dollars, weakened to 201.6 to $ 1 at 1:42 p.m. in Buenos Aires. The spread between the official peso and the blue chips reached 102.3%, against 100.5% yesterday, its widest in at least a year.
Local investors have become increasingly pessimistic about the peso, betting that the government will be forced to step up the devaluation after the November elections.
President Alberto Fernández’s administration has insisted on a slow depreciation of the official exchange rate, keeping the currency overvalued through tight capital controls to protect reserves as it tries to curb inflation to over 50% per year .
“This pressure is exactly what is needed for Fernández to moderate himself,” said Siobhan Morden, head of fixed income for Latin America at Amherst Pierpont in New York. “Government policies are now fully reaching an inflection point, now that net liquid foreign reserves are negative.”
The government has said it will continue to implement the monetary policy foreseen in the 2021 budget and that a sudden hike in the exchange rate was neither planned nor planned, Economy Minister Martín Guzmán said on Thursday. .
by Scott Squires & Ignacio Olivera Doll, Bloomberg