Hoy, Rafael Di Giorno, director de Proficio, habla con @taos @WSJ sobre el peso argentino - via Wall Street Journal Argentine Peso Gets a Reprieve - Currency Roars Back Amid Black-Market Crackdown; Traders Remain Wary BUENOS AIRES—Argentina is enjoying a pax cambiara, or currency peace, but many wonder if it will last. After a year of losing ground, the peso has been roaring back in the black market, strengthening almost 28% over the last six weeks and nearly 5% on Monday alone. The gains come as a crackdown on trading, a bond sale and a currency swap with China have curbed transactions in both the legal and underground currency markets. After plunging to a record low of 15.95 to the U.S. dollar on Sept. 25, the peso clawed its way back to 12.50 on the black market about midday Monday. “The next couple of months could be complicated for the economy, so I wouldn’t be surprised if this backslides and we see more tension in the exchange market,” said Ariel Setton, a Buenos Aires-based economist. For now, though, the gain has brought relief to Argentines worried about high inflation and fearful that the government could devalue the currency, which officially trades at 8.50 pesos to the dollar. The black-market currency trade sprouted to life three years ago when Argentina banned the sale of dollars. The policy was intended to stanch the bleeding of international reserves and free up dollars so the government could use them to pay debts, buy imported gas and fund public spending. Economists say the move backfired. Since early 2011, reserves have dwindled to about $28 billion from more than $52 billion, raising concern about how Argentina will pay future bills. The peso’s comeback began when a new central-bank president took over on Oct. 1. Since then, the official, Alejandro Vanoli, has stepped up coordination with other entities, including the country’s securities regulator and an anti-money-laundering agency, to crack down on illegal foreign-exchange houses. The government has carried out more street inspections and shut down some currency shops, leading some black-market traders to go further underground. “Nobody wants to draw attention so there’s a big incentive not to raise the rate too much,” said one trader, referring to the price of the dollar. Mr. Vanoli’s appointment “marked a change in the relationship between banks, monetary policy and fiscal policy,” said Mr. Setton. While the government is pressuring black-market traders, it has also discouraged the legal purchase of dollars through stock and bond arbitrage. Fewer people and companies are legally buying bonds in pesos with the sole purpose of then selling them in dollars. October trading volumes for some of these assets were down more than 95% from the previous month, according to Rafael Di Giorno, director of Proficio Investment Management. That has led the price of dollars obtained this way to decline, which is reflected in a lower cost of dollars in the black market. “Demand for dollars has declined a bit because of the pressure,” Mr. Di Giorno said, “ but I don’t think it’s sustainable through the end of the year.” The government has also tried to get more pesos off the street. The central bank raised interest rates for small deposits. The rate, which totals around 23% for three-month deposits, led people to deposit 3 billion pesos last month, Mr. Vanoli said in a recent radio interview. Given that many economists say inflation totals around 40%, Mr. Setton described the interest-rate move as “timid.” Still, it may have reduced pressure on the dollar by taking those pesos out of circulation, he said. In another move that boosted the peso, the government last month sold $983 million in so-called dollar-linked bonds. The two-year, dollar-denominated bonds carry an annual interest rate of 1.75% and pay investors in pesos at the official exchange rate. So even if Argentina devalued the peso, the bondholders would be protected against losses. Last week, Argentina’s central bank tapped a currency swap line with its Chinese counterpart, obtaining the equivalent of $814 million and bolstering reserves. Last month, the government also struck a deal with exporters in which they will ship $5.7 billion in soy and grains in exchange for authorization to export wheat and flour. The deal will bring in an additional $1.5 billion this year on top of what the farmers had already pledged to export, a government official said. “This increases the supply of dollars available in the market and brings assurances that more will be available later on,” said the official. The market has been especially volatile since June, when Argentina lost a legal battle with hedge funds that had sued it in the U.S. Argentina has refused to obey a court order that it pay the funds about $1.7 billion for bonds they bought after the country defaulted on them in 2001. The dispute led Argentina to default on some of its debt at the end of July, raising fears the country could remain locked out of global markets and be unable to obtain dollars for the foreseeable future. The peso’s fate, analysts say, will depend on what happens in the dispute with the hedge funds. Many investors expect Argentina to settle up in January. That is when a clause expires that would require Argentina to similarly compensate other bondholders if it offers additional money to the hedge funds. Whether the peso’s gains are “definitive or transitory will depend on what happens at the beginning of next year,” said Luciano Cohan, chief economist at Elypsis, a consulting firm. “The government has built a bridge to next year,” he said. “If we don’t get good news and the dollars don’t start rolling in, it’s very probable the situation we saw earlier this year will repeat itself.” Para ver la nota original: online.wsj/news/article_email/argentine-peso-enjoys-a-tentative-calm-1415635891-lMyQjAxMTA0NzEzMDMxMjA5Wj
Posted on: Mon, 10 Nov 2014 20:13:18 +0000
Trending Topics
Recently Viewed Topics
© 2015