Forex - Argentina Flows: ARS Resumes Trading With Contained Losses After Wave of Negative News


 13:27 (GMT) 20 Aug

  [Forex Flows]

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Argentina Flows: ARS Resumes Trading With Contained Losses After Wave of Negative News (0101-NMCZ-C02)

After yesterday holiday, ARS is resuming trading losing 1.52% to 55.64. Considering that the currency is pricing the rating downgrade by three notches to CCC by Fitch and by one notch to B- by S&P, and also the resignation of Economy Minister Nicolas Dujovne, as well as yesterday's regional selloff, losses seem contained. It seems that the market is happy with recent comments by Central Bank Governor Guido Sandleris and new Economy Minister Hernan Lacunza, which make clear that the government is focused on keeping ARS away from another rout in order to maintain governability.

New Economy Minister Hernan Lacunza said that the Central Bank will use all its tools so that the FX does not abandon "last week levels". He said that the main target of his administration is to "guarantee the stability of the exchange rate", adding that "the exchange rate is currently significantly above its equilibrium level".

In a separate presser, Central Bank Governor Guido Sandleris said that the Bank will continue to intervene the FX market if necessary (the Bank has sold half a billion USD in the spot market after the primary elections), though he suggested FX interventions are to provide liquidity and not aimed to provide support to the peso. He said that "there is consensus that the FX is very competitive"

We believe ARS has more to catch up, and see high risk for increased pressures that take the currency toward 60-65, despite coordinated effors by the government to support the peso.

Argentina Flows: ARS Resumes Trading With Contained Losses After Wave of Negative News (0101-NMCZ-C01)

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