JAKARTA (TheInsiderStories) – Yesterday, Argentina adopted a new measures aimed to stabilize its currency with the central bank ease limits on its foreign exchange market interventions. The country signaling its willingness to sell reserves in an effort to better control the volatility of the local currency.
Furthermore, Argentina had set maximum and minimum exchange rate levels for the Peso against the US dollar, in which the currency could fluctuate freely. The central bank would only intervene — by buying or selling dollars — if the peso dropped below 51.54 or rose above 39.75 to the dollar.
The Peso began the session up 3.37 percent and closed 3.56 percent stronger at 44.37 per the US dollar. Before the foreign exchange market opened, the central bank said it may start selling dollars below the threshold of 51.448 pesos per greenback. This had previously not been allowed under the country’s $56 billion standby financing deal with the International Monetary Fund (IMF).
The new set-up gives the central bank more freedom to support the local currency by loosening a no-intervention peso trading band that had been in place since October. The Peso hit a record low on last Friday, ending a tough week for local markets buffeted by uncertainty over Argentina’s recession, 54 percent inflation, and the October general election.
“Argentina is facing a challenging situation in financial markets. Today, Fund staff briefed the IMF’s Executive Board on the recent market volatility experienced by Argentine assets and the recalibration of intervention policies announced by the Banco Central de la República Argentina,” David Lipton, the IMF’s First Deputy Managing Director issued the following statement on Monday (04/29).
He added, the Executive Directors expressed their support for the framework underpinning the Stand-By Arrangement and the government’ implementation of those policies. IMF last year agreed to lend Argentina $56 billion to help the South American country battle its currency crisis and inflation issues.
The central bank now has the power to sell up to $250 million a day to satisfy market demands. The move comes on the back of a freeze in the prices of basic goods and public services announced by President Mauricio Macri two weeks ago. To combat last week’s currency volatility, the central bank rose its reference interest rate to 72 percent.
However, Macri’ popularity has been falling in opinion polls as his austerity measures have proved highly unpopular. His government says currency instability is the main factor in the country’ spiraling inflation, which reached 11.8 percent for the first quarter of 2019, with the figure for the last 12 month just under 55 percent.
Argentina’ economic crisis and rising prices are two of the major concerns for citizens ahead of October’s elections. Macri reportedly has slipped behind former president Cristina Kirchner in opinion polls.
Written by Lexy Nantu, Email: firstname.lastname@example.org