A day after significant primary electoral outcomes, Argentina adjusted the value of its official peso by approximately 18%.
This move comes as the government recognizes its waning options in upholding the previously maintained exchange rate, especially in light of dwindling reserves.
As of the latest report, the peso is set to trade at 350 per dollar, marking a considerable difference from the previous rate of 287 pesos.
The country’s central bank has announced an interest rate hike, setting the new rate at 118%, up from 97%.
Under President Alberto Fernández’s tenure, this monetary decision arrived after prolonged efforts to stave off such a currency adjustment.
Such a shift is anticipated to impact the inflation rate, potentially escalating it, and might infuse political uncertainty leading up to the presidential elections scheduled for October 22nd.
Argentina’s international reserves have reached their lowest point in nearly two decades. With liabilities surpassing assets, the country’s policymakers have limited options to uphold the peso’s value.
Inflation had notably surged, registering over 115% in June.
These fiscal measures coincide with the electoral success of libertarian candidate Javier Milei.
The governing Peronist coalition didn’t fare well, finishing third, even behind the business-favored opposition.
Consequently, the government’s representative, Economic Minister Sergio Massa, is anticipated to face increased challenges, especially considering the expected adverse reactions from the Argentine public due to these fiscal measures.
The nation’s central bank has verified the rate adjustments, and other rate tweaks were noted.
Meanwhile, questions directed to Buenos Aires’ Economic Ministry were referred to the central bank.
Reflecting the nation’s economic concerns, its foreign bonds dropped, with certain notes witnessing significant declines.