Argentina curbs banks' access to pesos amid growing market turmoil

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Argentine peso weakens and bond prices fall after S&P slashes rating. Read more:

The latest round of market tumult to plague Argentina started with the Aug. 11 primary election, in which business-friendly President Mauricio Macri got soundly thumped by center-left Peronist challenger Alberto Fernandez.“The central bank is not allowing them to distribute results, that means they cannot use their pesos. This is not a restriction of access to the FX market, but on the availability of pesos,” a source familiar with the central bank plan told Reuters.

Credit rating agency Fitch followed after market hours on Friday with a downgrade of Argentine debt to “Selective Default.” Then came a downgrade from Moody’s, citing the new central bank measure and heightened political uncertainty associated with a likely Fernandez victory in October. The peso closed 2.72% weaker at 59.52 per dollar, extending losses so far this year to about 36%. Over the counter sovereign bonds fell an average 5.5% during the day, traders said.

Investors in Argentina fear a return of the left to power could herald a new era of heavy government intervention in Latin America’s third-largest economy. They also fear the plan to extend maturities will do little more than buy time and fail to prevent a more serious financial crisis further down the line.

 

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