Argentina’s promises to defend its beleaguered peso gained credibility on Tuesday after the central bank poured $112 million of its reserves into dollar auctions, helping to boost the local currency about 0.5 per cent on the day after steep losses.
In three interventions in the foreign exchange market, the bank acted in concert with statements from officials saying the government’s top priority was to stabilise the peso after it lost 18 per cent of its value against the US dollar last week.
“The interventions pushed the peso through the 55-per-dollar barrier,” to 54.50 pesos to the greenback, Gustavo Quintana, foreign exchange trader with Buenos Aires brokerage PR Corredores de Cambio, said.
The recession- and inflation-racked country was hit by a wave of uncertainty following an August 11th primary election in which business-friendly president Mauricio Macri got thumped by centre-left Peronist challenger Alberto Fernandez, who emerged as the clear front-runner ahead of the October 27th general election.
Minutes after being sworn in by Macri on Tuesday, treasury minister Hernan Lacunza said the government would stand by the peso and stick to its goal of erasing its primary fiscal deficit, despite a series of spending measures announced last week aimed at spurring growth.
“We want to leave a solid economic platform for whichever candidate wins” the presidential election, said Lacunza, the former economy chief for Buenos Aires province. He told a press conference that Argentina had a primary fiscal surplus in July and that he expected a surplus in August as well.
Last week, Macri, smarting from his primary election loss, announced a cut in taxes on food and personal income along with increased welfare spending. The measures raised concern his administration will miss fiscal targets agreed with the International Monetary Fund as part of a $57 billion loan deal.
“We are closely following recent developments in Argentina and are in ongoing dialogue with the authorities as they work on their policy plans to address the difficult situation that the country is facing,” the IMF said in a statement.
“An IMF staff team will travel to Buenos Aires soon,” said the statement, which was signed by IMF spokesman Gerry Rice. – Reuters
