Argentine Peso Jumps After Central Bank Acts to Reverse Sentiment

The bank moved to reduce the number of pesos in circulation by raising reserve requirements for banks, a measure that will absorb 60 billion pesos ($2.1 billion) in liquidity. Policy makers also increased interest rates on local central bank notes known as Lebacs that come due over the next few months to pay yields as high as 52 percent.

The government has no plans to add capital controls, Treasury Minister Nicolas Dujovne, Finance Secretary Santiago Bausili and Economic Policy Secretary Guido Sandleris told investors during a conference call meant to assuage concerns.

They added that Argentina will borrow mostly in the domestic market in 2018 and 2019. The government will only raise funds abroad in 2019 to pay for $3 billion of maturing debt.

"The most important objective is to regain the confidence of the markets to lower the cost of financing," Dujovne said during the call. "That’s our No. 1 objective."

Stocks didn’t fare as well as the peso, with the benchmark Merval equity index reaching the lowest since September.

Ignacio Olivera Doll & Carolina Millan