Argentina Peso Strengthens for First Time Since Primary Election
Argentina’s peso strengthened against the dollar Thursday, the first improvement for the currency since a left-wing presidential candidate performed better than expected in a primary election last Sunday.
The peso strengthened 5.2% Thursday to 57.25 per dollar. Argentina’s benchmark Merval stocks index also advanced, closing up 4.2% at 31182.3 points. The Merval is down more than 23% over the past five business days.
The peso and stocks plunged on Monday and continued to slide on Tuesday and Wednesday, after Alberto Fernandez won 48% of the vote in Sunday’s primary election, which determines political parties’ candidates for the October general election and serves as an early indicator of support. Before the vote, the peso traded at 44.80 per dollar.
President Mauricio Macri won only 32% of the vote. The result suggests that Mr. Fernandez will win in October, and investors are concerned he will reverse many of Mr. Macri’s efforts to open up Argentina’s economy, analysts say.
Thursday’s partial recovery may be an indication that at least some investors believe a possible Fernandez administration won’t be so radical.
“As the uncertainty around Fernandez’s economical stance and posture toward a debt restructuring becomes clearer, we believe the market will show some relief,” said Daphne Wlasek, a strategist at XPI in São Paulo. She does expect volatility to continue, though. “Prices should only fully adjust once Fernandez announces the main cabinet leaders” and details his policies, she said.
The peso’s improvement on Thursday is more of a technical correction, after the big decline over the past week, than a sign of new confidence in the outlook for the country, according to Pedro Paulo Silveira, chief economist at the Nova Futura brokerage in Sao Paulo.
“The peso weakened a lot,” and some people see an opportunity to buy, Mr. Silveira said. The peso has probably started to stabilize at a new level, and should start moving more on specific news events going forward, he added.
On Wednesday, Mr. Macri introduced several measures, including a minimum wage increase and a freeze on fuel prices, intended to help Argentines struggling with high unemployment and double-digit inflation. Mr. Macri and Mr. Fernandez also spoke on the phone Wednesday, and agreed to work to try to calm financial markets.
Jeffrey T. Lewisand Paulo Trevisani