Argentine peso opens stable on first day of new trading band
The peso opened at 41.30 to the dollar, unchanged from Friday, when the currency lost 3.87 percent against the greenback in one day alone.
With the economy shrinking, inflation rising and President Mauricio Macri facing opposition to budget cuts ahead of his 2019 re-election campaign, analysts said the peso would likely remain unstable over the months ahead.
Under a revised $57 billion standby financing agreement, Argentina has established a trading band for the peso between 34 and 44 per U.S. dollar, a band launched on Monday. The currency has been at the center of emerging market volatility this year.
“Doubts continue to hover over the government’s economic plan despite agreement with the International Monetary Fund,” local consultancy Portfolio Personal said in a note to clients.
The central bank is expected to intervene in the foreign exchange market to support the currency if the 44 per dollar threshold is broken. The bank has spent almost $16 billion in interventions so far this year.
“Whenever a new program is implemented there’s a period of transition and adaptation by the market, until it gets used to the new rules and signals given by the central bank,” the central bank’s new chief Guido Sandleris said in an interview published by local daily La Nacion on Sunday.