Argentine peso back in the red as early rally fizzles
The Argentine peso saw its early gains evaporate on Monday as traders digest differing reports over the size of the credit line increase that the country could potentially receive from the International Monetary Fund.
The peso initially climbed as much as 2.8 per cent to a near one-month high of 36.16 per dollar after Argentine press reported over the weekend that the government is in talks with the IMF to increase its $50bn credit line by as much as $20bn.
But the rally quickly fizzled and the peso is now trading 0.3 per cent lower at 37.28 after Bloomberg, citing a government official with direct knowledge of the discussions, said an increase of $3bn-$5bn would be more likely.
The currency moves come as President Mauricio Macri looks to shore up investors’ confidence in Latin America’s third-largest economy. Mr Macri is in New York this week for the United Nations General Assembly and will also be holding meetings with fund managers and potential investors.
Buenos Aires was forced to turn to the IMF for a bailout in May after concerns over rising US interest rates and the country’s high inflation triggered a sharp depreciation in the peso. Despite the IMF’s backing and repeated interventions by the Argentine central bank — which last month raised interest rates to a record 60 per cent, the peso remains down by over 50 per cent this year amid lingering scepticism over the country’s ability to cover its finances.
A big increase in the IMF credit line and a speed up in the disbursement of that fund would provide a big fillip for Mr Macri’s administration as that would sharply lower the country’s need to tap the international markets for funding in the near term.