Economy

Yen, dollar buoyed as investors seek safety

Yen, dollar buoyed as investors seek safety”

Investors fear that if Macri doesn't win a second term in October, the opposing team of left-leaning Alberto Fernández and his running mate - the former leader Cristina Fernández de Kirchner - will undo the progress Macri has made to regain the trust of investors in Argentina and overseas.

The upset, widely seen as a preview of October's presidential vote, threw the doors open to the very real possibility a more protectionist government will take power come December and unravel the hard-won gains that Macri made to regain the trust of the global markets.

Argentines Choosing Bitcoin as a Store of Value as Peso Plunges?

If this comes to pass, the new government is expected to implement fixed export taxes in a reprise of the policies of former president De Kirchner, who is a running mate of the centre-left's leader Alberto Fernandez.

The surprise outcome ruled the nation's financial markets, sending main Argentine stock market plunging more than 30% and S&PMerval Index falling 48% in dollar terms.

IHS Markit calculations show that the current price level of 5-year CDSs means that the likelihood of Argentina's bankruptcy (defaulting on the country's external obligations) has increased to over 72% over the next five years.

Argentina has billions of dollars of foreign-currency debt due over the next year, according to Bloomberg - $15.9 billion in debt payments is due in 2019, and another $18.6 billion in bond principal, loans and interest payments. The Japanese currency, along with the dollar and Swiss franc, is a safe haven in times of uncertainty. It was also punctuated by another default that made the country an worldwide pariah for years.

The stunning loss sent Argentine markets reeling.

The company expects to cut its exposure further on Argentine bonds once prices stabilize, he said.

"It is going to be an extremely tough period for Argentinian assets", said Marcin Lipka, a senior analyst at brokerage Cinkciarz.pl in Zielona Gora, Poland.

Concerns that a trade deal would not be reached before the 2020 USA presidential election grew after Goldman Sachs on Sunday became the latest to cut its United States growth outlook and warn a trade stand-off would fester past the election.

"What we are pricing right now is radical change in economic policies", he said in an interview.

"The promise of a trade deal coming this year, I think that's becoming less and less likely", Shah said.

The peso plummeted on Monday in the wake of the defeat of President Mauricio Macri in primary elections on Sunday. If Macri loses, Fernandez may attempt to renegotiate Argentina's debts with the International Monetary Fund. "There is a chance for this but it is hard to predict the timing".

Macri still hopes to reverse the result in October.

While Anthony Pompliano said in a tweet that this could be the first of a series of a currency crisis that might lead to a domino effect where Bitcoin will be the only safe haven.

He suggested that the market look to Macri for answers rather than to him and that the reaction shows how investors react when they feel they've been "ripped off".



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