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Weekly Report - 22 September 2011 (WR-11-38)

ARGENTINA: Dollar to remain stable, at all cost?

Argentina is pulling dollars from every possible source in an attempt to keep the value of the greenback down against the Argentine peso. In the first three weeks of September, the central bank (BCRA), the state-owned Banco Nación and the social security agency (Anses) have sold dollars to the local market, allowing for only a slight depreciation of the local currency (of 1.2%). This, however, has cost the BCRA US$1.13bn, a month-on-month increase of 96.5%. On 19 September, the BCRA sold US$270m bringing its reserves below US$50bn (to US$49.22bn), the government’s ideal reserves target. So far this year, Argentina is the only country in Latin America that has seen its reserves shrink (by 4.7%). In the same period, Brazil’s have grown by 15%, Mexico’s by 20% and Uruguay’s by 35%. Peru could soon overtake Argentina as the country with the third largest reserves in the region.

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