Argentine ‘Kitchen Sink’ Support Fails: Peso Plunges Back Near Record Lows

Update: Who could have seen that coming?


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Argentina’s central bank is once again the only (dollar) seller in town, after a mix of direct intervention and changes to bank reserve requirements has prompted a rebound in the peso but has pummelled the bank stocks (and the broad MERVAL index).

BCRA bragged about its plans to sell as much as $400 million today and tomorrow and the peso is up – drum roll please – around 3%…

The Central bank’s moves include (via Bloomberg):

  • Sale of dollars through FX auctions called 30 minutes in advance; two first to be held today and tomorrow; $400m was mentioned, but unclear if it’s total amount for both

  • Reserve requirement hike of 5 percentage points, which will reduce the availability of pesos by 100b pesos, leaving less cash available to be exchanged for dollars

  • Reduce limit of total FX position of financial institutions to 5% from 10%

  • More flexibility in requirements to negotiate USD Letes in secondary market

Earlier in the day, Infobae reported that a process of buying back Lebacs would also be announced and that new BCRA chief Caputo would have made an agreement with grain producers so they would sell dollars from their exports, resulting in a daily inflow of $300m.

But judging by the mere 3% gain in the peso, the ‘kitchen sink’ moves are not exactly good bang for its buck – and remember, these are swaps that will be unwound at some point.

And while the currency is up, stocks are very notably not…

As Bloomberg notes, the Buenos Aires Stock Exchange Merval Index fell 5.6 percent to 28,469.58. The move was the biggest since falling 5.9 percent on Feb. 2 and follows the previous session’s increase of 0.11 percent… and is back below ist 200DMA…

Ahile Pampa Energia SA contributed the most to the decline, falling 7.6 percent, the biggest movers include the banks: Grupo Financiero Galicia, down 7.5 percent; Central Puerto, down 4.7 percent; Agrometal, down 1.8 percent; and Mirgor Sacifia, down 1.9 percent.





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