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In brief: Argentina

Argentina: The finance ministry has announced that it plans to use US$7.5bn of the US$50bn credit line it has obtained from the International Monetary Fund (IMF) as part of a new Stand-By Agreement to sell US dollars in the domestic currency market in order to stabilise the value of the peso. A ministerial statement explained that the plan consists of using the funds to carry out “pre-announced daily sales [of US dollars] via an auction mechanism run by the central bank (BCRA) and at the request of the treasury”. However, the ministry was clear that the idea was not to set an exchange rate target but to maintain a floating exchange rate. The announcement came after the value of the peso fell by 1.1% in the domestic currency market yesterday, to reach a record high exchange rate of Ar$26.69/US$1, following the confirmation by the US Federal Reserve that it would be increasing its benchmark interest rate by 0.25 percentage points to 1.75%-2%. The sharp depreciation of the peso yesterday led BCRA to once again intervene and sell US$700m in the spot market to stem the fall of the peso.

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Latin America 2018

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