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Argentina Bolsters Peso

Argentina Bolsters PesoArgentina Bolsters Peso

Argentina investors say the central bank’s extraordinary effort to bolster the peso Friday may be just the beginning, with more such actions to be expected if the currency doesn’t stabilize soon, Bloomberg reported. Policymakers’ decision to raise the key interest rate 3 percentage points to 30.25% Friday, a surprise move announced just days after they held borrowing costs, led the peso to erase losses for the day. Should the currency resume the sharp selloff it saw in recent days, the central bank is likely to hike again, according to strategists at TCW Group and Barclays Plc. “The rate should be enough to keep the foreign-exchange dynamics stable,” said Mauro Roca, the managing director for emerging markets sovereign research at TCW Group. “But any short-term decisions will be tied to whatever happens in the FX market.” After spending $4.3 billion this week alone to bolster the peso in the spot market and taking the highly unusual step of raising rates at an unscheduled meeting, policy makers are showing their determination to keep a lid on consumer-price increases, which will require a stable exchange rate.

 

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