Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Argentina's $15 billion dollar burn stems peso rout: for now

EconomySep 10, 2019 02:11PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

By Walter Bianchi

BUENOS AIRES (Reuters) - Argentina has burned through $15 billion in foreign reserves over the last month to stabilize the peso, which crashed along with the country's bonds after a sharp electoral defeat for market-friendly president Mauricio Macri.

Central bank data showed reserves tumbled 22% since Macri was trounced in an Aug. 11 primary election by Peronist rival Alberto Fernandez.

The shock result spooked investors, who worry especially about Fernandez's running-mate, ex-President Cristina Fernandez de Kirchner, recalling the interventionist policies she imposed during her two terms between 2007 and 2015.

The peso lost a quarter of its value against the dollar in August and the central bank burned up reserves to stem the decline. Macri ultimately imposed currency controls, and the peso has steadied over the last week.

Last year, Argentina was already reeling with soaring inflation and a weak peso when it got a $57 billion credit line from the International Monetary Fund to help avoid default on foreign debt. Now investors worry Latin America's No.3 economy could still run short of much-needed foreign reserves as it keeps defending the peso ahead of the Oct. 27 general election.

"It's already at a dangerous level," said Roger Horn, senior emerging market analyst at SMBC Nikko Securities America.

"When they got the IMF facility the idea was that it would act partially as a buffer but they've been using it lately to defend the currency ... something which we all learned not do in the 1997-98 Asia Crisis."

Central bank reserves stand at $51.3 billion, central bank data show, down from $66.3 billion before the August primary.

Private sector dollar deposits have fallen around a quarter to $24.2 billion from $32.5 billion before the primary.

"The outflow of deposits in dollars represents the main source of the fall in reserves in recent days," said Matías Roig from Argentine brokerage Portfolio Personal Inversiones.

Argentines still remember a 2001-02 crisis, when the government froze deposits and imposed caps on cash withdrawals from banks. In another crisis in 1989, bank deposits were confiscated in exchange for bonds.

Some bankers said outflows appeared to slow over the last week under capital controls that restricted the purchase and transfer of currencies overseas.

"Last week the daily outflows of deposits in dollars were decreasing, registering on Sept. 4 an output of $774 million; almost 30% less than the previous Friday," investment bank Puente wrote in a note.

Private sector bank deposits in pesos also held stable at around 2.4 trillion pesos, central bank data showed.

The interbank peso , which was flat on Tuesday, has lost 19.11% since the primary election and 32.73% so far this year, making it one of the world's worst-performing currencies.

Argentina's $15 billion dollar burn stems peso rout: for now
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email