Economy

Argentina bonds sink after currency controls brought back

Argentina bonds sink after currency controls brought back”

The decree published on Sunday said that the currency measures were needed temporarily to "regulate more intensely the currency exchange regime and strengthen the normal functioning of the economy".

The measures say residents can't buy more than US$10,000 a month without permission from the Central Bank.

The peso closed 5.39% higher at 55.98 per US dollar, traders said, its strongest level in a week after a near record low close on Friday.

Argentine bond prices fell to record lows on Monday and the official and black market pesos diverged after the country imposed capital controls in a bid to stem a currency rout that is sharpening the risk of default.

"It's an illegal market, it's small", central bank head Guido Sandleris said at a briefing on Monday in response to a question from Reuters.

Macri's government and the central bank are trying to stabilise the economy as the October 27 presidential election looms, for which Fernandez is now the front-runner.

A foreign exchange trader said there had been a clear rise in demand for dollars via the parallel market, known locally as the "blue" market, and that over the next few days more people would likely seek to make a profit from the gap, buying dollars in the official market and selling them in the black market.

"All of this is to preserve the economy as well as possible in this circumstance", said the source, who requested anonymity because he was not authorized to speak to the media. "There's a limit to what they can do without capital controls".

"If we do not do it, the consequences would be serious". "It has dropped 2.5 pesos, but with very little volume" of transactions, Lacunza said on Monday.

On Friday, the peso slid another 1.74 pesos against the dollar, devaluing a total of 33.2 percent compared with August a year ago.

Argentina's worldwide bonds fell to record lows on Monday and peso got slapped down again after President Mauricio Macri imposed capital controls on Sunday after announcing the government would "re-profile" its debt by extending maturities.

On Monday morning in Buenos Aires, before banks had opened their doorways, winding lines of customers waited to withdraw savings after Argentina's government imposed capital controls limiting dollar purchases and transfers. Staff understand that the authorities have taken these important steps to address liquidity needs and safeguard reserves.

The Fund's next scheduled review of Argentina's lending program is on September 15.

The measures are far less restrictive than those imposed by the government of former president Cristina Fernández de Kirchner, which restricted even spending on vacations overseas and taxed credit card transactions in dollars, leading to the rise of a currency black market.

"This is a time when we are getting a lot of surprises".

Fernandez de Kirchner, in office from 2007 to 2015, clamped down on access to United States dollars in a bid to protect the central bank's precarious reserves.



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