The Argentine peso fell to a record low as the central bank changed its strategy to protect the currency and the International Monetary Fund said it would not set any exchange-rate targets for a standby loan.
The peso dropped 5.5 per cent to 24.6 per dollar at 11:03am in Buenos Aires, pushing the decline this year to 25 per cent, the worst in emerging markets. The central bank offered $5 billion at 25 pesos per dollar at the open of trading at 10am. Only about $500,000 were bought at that price.
"They are trying to set a floor for the peso," said Juan Jose Ciro, chief financial officer at Banco CMF, a local bank in Buenos Aires. "It's a low floor, but finally a floor. The message is that for those who want dollars that's fine, but it is going to cost you."
The central bank is said to be seeking to reduce volatility in markets by sending a signal to traders that the peso can fall but there is a limit, according to a person with direct knowledge. That is a departure from the strategy since April, where it has spent more than 10 per cent of its reserves to stem a decline.
The central bank is scheduled to hold an auction on Tuesday, where it wants to sell as much as $30 billion of notes to rollover before they expire on Wednesday. – Bloomberg
