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LatinNews Regional Monitor: Brazil & Southern Cone - 02 October 2018
In brief: Argentina
The value of the US dollar against the Argentine peso fell by 4% to Ar$40.74/US$1 on 1 October as Argentina’s central bank (BCRA) implemented its new exchange rate regime that incorporates currency bands. The new exchange rate regime was introduced as part of the Stand-By Agreement that the Argentine government has reached with the International Monetary Fund (IMF) and it is designed to reduce speculation in the local currency market by setting a clear exchange rate band of Ar$34/US$1-Ar$44/US$1 in which BCRA has pledged not to intervene in support of the peso in the currency market. The new regime appears to have succeeded in anchoring market expectations on the value of the peso despite concerns that speculators would seek to “test” BCRA’s resolve not to intervene by seeking to buy large amounts of dollars. The fall in the exchange rate also came as BCRA increased its short-term interest rates from 65% to 72%.
