Argentina's center-left presidential front-runner Alberto Fernandez said on Thursday he was comfortable with the current exchange rate of 60 pesos to the U.S. dollar, after the currency lost about a quarter of its value in recent days.
The peso began tumbling in the wake of Fernandez's unexpectedly strong primary election showing on Sunday. Fernandez, whose running mate is former leftist President Cristina Fernandez de Kirchner, trounced center-right President Mauricio Macri, whose IMF-backed austerity measures turned off voters. "The dollar at 60 seems fine to me," Fernandez said in a local radio interview.
Those comments could, however, prove awkward if the currency falls much further. Nonetheless, early signs on Thursday suggested the peso may be stabilizing. Shortly after the market opened, it was trading at around 60 pesos per dollar in thin volumes, traders said.
On Wednesday, the peso closed 7.14% weaker at 60.2 per dollar. Argentina's lurch back into crisis comes amid widespread volatility and fears of a global recession triggered by the trade war between China and the United States, and ongoing protests in Hong Kong. Emerging markets have been particularly badly hit by recent volatility in global markets.
Argentina's Merval stock index has sunk by a staggering 34.47% since Sunday. It is due to open later on Thursday. On Wednesday, Macri announced a series of welfare subsidies and tax cuts for lower-income workers, an awkward about-turn for a president who took office in 2015 vowing to slash public subsidies and to correct what he called years of leftist economic mismanagement.
Macri promised to raise the minimum wage, temporarily freeze gasoline prices and increase the income tax bracket floor by 20%. The new measures, which would cost about $678 million, would allow a tax cut for two million workers worth some 2,000 pesos ($33) per month per person, the government said. In a bid to stem peso losses, the central bank sold $248 million from its reserves on Wednesday, bringing its total sales in reserve dollars to $503 million this week.
The bank has about $66 billion in reserves, of which about $20 billion are free resources that can be used to pay debt and stabilize the peso, according to an Argentine government official. Debt payments for the remainder of 2019 are estimated at between $5 billion to $10 billion, depending on Argentina's ability to roll over domestic Treasury bills, leaving a thin margin to intervene in the foreign exchange market.
There is an additional $27 billion in maturities in 2020, according to government data.
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