Date
18 September 2019
Argentine peso is down more than a third so far this year, following a more than 50 percent slide last year. Photo: Reuters
Argentine peso is down more than a third so far this year, following a more than 50 percent slide last year. Photo: Reuters

Argentine peso, bonds plunge after capital controls

Argentine bond prices fell to record lows on Monday and the official and black market pesos diverged after the nation imposed capital controls in a bid to stem a currency rout, Reuters reports.

The peso closed 0.88 percent stronger in official markets, but closed 0.79 percent weaker in the black market at 63.5 per dollar, a divergence underscoring a loss of trust in the official price, the report said.

Central bank president Guido Sandleris on Monday called Argentina’s financial system “strong” and said the bank will adhere to its strict monetary policy, despite the currency restrictions.

Speaking at a news conference, Sandleris said the bank is in talks with the IMF to “redefine” the goals under its US$57-billion financing agreement for September, though there have not yet been any changes.

On Sunday, Argentine President Mauricio Macri, a free-markets advocate who abolished capital controls after he came to power in 2015, did a sharp about-face for his administration as he reinstated the curbs.

The move came after the official peso had lost more than 23 percent since the Aug. 11 primary election turned the country’s politics on its head, with Macri getting thrashed by his populist-leaning opponent Alberto Fernandez.

The central bank has burned through nearly US$1 billion in reserves since Wednesday, but has failed to stem the peso’s slide.

Fernandez is the clear front-runner ahead of an Oct. 27 general election. His vice presidential running mate is former President Cristina Fernandez de Kirchner, a free-spending populist who applied trade and currency controls during her two terms from 2007-2015.

Her presence on the ticket has caused concern about the return of the interventionist left to power, although the more moderate Alberto Fernandez has said he alone will set policy.

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