POST TIME: 2 September, 2018 00:00 00 AM
Argentine peso recovering after record low against dollar

Argentine peso recovering after record low against dollar

Pedestrians walk by a Buenos Aires exchange bureau where the buy-sell board displays the Argentine peso exchange values. AFP Photo

Argentina’s peso was recovering on Friday after President Mauricio Macri’s bid to secure accelerated IMF funding sparked two days of crashes that sent it to a record low against the dollar, reports AFP from Buenos Aires.

The peso recovered almost five percent on Friday to end the day at 37.98 to the dollar, as the Central Bank sold $250 million of its reserves to put the brakes on the peso’s plummet.

It had lost 20 percent of its value over the previous two days.

The peso was trading at almost 40 to the dollar at the end of Thursday after the Central Bank hiked interest rates to 60 percent—the highest in the world—in a desperate bid to stabilize a currency in freefall since Macri revealed the day before he had asked the International Monetary Fund to advance the remainder of an agreed $50 billion loan.

An initial $15 billion tranche was released by the IMF when the three-year stand-by loan was agreed in June, with another $3 billion due next month.

Part of that first installment was meant to help shore up the peso, but that backfired after Macri’s announcement as the crisis in investor confidence deepened.

“It is now unclear if that will be enough to stabilize the government’s finances amid persistent reserve drain,” said Europe-based Deutsche Bank analyst Jim Reid.

Argentina’s currency has lost more than 50 percent of its value against the dollar since the start of 2018, when the rate was 18 to one.

Inflation over the last 12 months is at around 30 percent.

“It’s a worrying situation, our salaries have lost 15 percent of their value,” said 46-year-old bank employee, Monica Vaccaro.

Finance Minister Nicolas Dujovne is heading to Washington next week to “continue to progress” talks with the IMF on “additional disbursements in 2019.”

The IMF released a statement saying its “goal is to rapidly conclude these talks and submit the revised economic plan to the Executive Board.”