(Updates with context and background)
BUENOS AIRES, April 21 (Reuters) – Argentina’s peso strengthened over 5% on Monday, surprising traders and regaining levels in line with where the currency was before capital controls were abruptly lifted at the start of last week.
The peso tumbled last week, before making up some ground, after the government undid large parts of years-long capital controls and shifted the currency from a controlled “crawling peg” to a far wider trading band.
The move was part of a wider reform package and tied to a $20 billion front-loaded deal with the IMF, which allowed the government to obtain over half the total funds last week and quench the central bank’s depleted foreign reserves.
President Javier Milei is aiming for farm export revenues and a shortage of pesos domestically to lead to a short-term appreciation of the local currency, bringing it toward the lower end of the trading band between 1,000 and 1,400 pesos.
In trading on Monday, the peso strengthened 5.14% to some 1,070 per dollar at 11 a.m. (1400 GMT), before losing some gains to trade at 1,080 pesos per dollar by 1629 GMT. The peso’s gains narrowed the gap with parallel rates that have been widely used in recent years due to the tough limits on access to official markets.
“The new exchange rate scheme has made a good debut, and we cannot rule out the dollar approaching the floor of the band,” said economist Roberto Geretto of Adcap asset management group in Buenos Aires.
Milei said last week that the central bank – which needs to accumulate billions of dollars of hard currency as part of the IMF deal – would not intervene in the forex market unless the peso breaks below the 1,000 per dollar trading band floor.
Peso futures, which suggest where the currency is heading, weakened sharply last week after the IMF deal was confirmed and the controls eased, but have since strengthened again, suggesting traders are getting more bullish about its outlook.
(Reporting by Walter Bianchi; Writing by Brendan O’Boyle; Editing by Natalia Siniawski and Ros Russell)
Stock Market today: Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation Ltd (HPCL) and Indian Oil Corporation Ltd (IOCL) saw their…
President Donald Trump listens to reporters' questions as he meets with Italian Prime Minister Giorgia Meloni in the Oval Office…
Continuum Green Energy IPO: An independent power producer, Continuum Green Energy Limited, on Monday, April 21, received the green light…
(Bloomberg) -- The Indonesian rupiah will extend this year’s 4% decline due to fragile investor confidence, spurring further intervention by…