(Repeats to widen distribution)
By Walter Bianchi
May 10 Argentina's central bank this month has
renewed its buying of dollars in the local foreign exchange
market, checking the rise of the country's peso currency
While the bank has not said what its currency target is, the
widespread perception in the market is that it wants to curtail
its strengthening, which has been 2.1 percent so far this year.
A strong peso currency makes Argentina's exports less
competitive, undercutting a government goal of boosting sales of
the country's goods abroad to help lift the economy out of a
The bank so far this month has bought $500 million on the
spot market after purchasing none in April and $600 million in
all of March, according to the central bank. That helped take
the peso to 15.54 per dollar on Wednesday, a bit weaker than
15.35 pesos on May 2.
Nomura Securities this week said the interventions would
likely seek to set a floor so the peso does not strengthen
beyond 15.20 per dollar.
"The heightened (foreign exchange) intervention may provide
a floor of resistance; however we continue to expect real (peso)
appreciation through 2Q17," Siobhan Morden, head of Latin
America fixed income strategy, wrote in a report. A real foreign
exchange rate factors in inflation.
Argentina is expected to have inflation of 21.0 percent this
year, a central bank poll of economists showed earlier this
month, well above the 17 percent ceiling of the bank's target
range. The government says consumer prices rose 40.9 percent in
To ease inflationary pressures, the central bank seeks to
soak up pesos by offering high interest rates on its securities,
including a 24.25 percent rate on its short-term Lebacs.
But analysts say this policy runs counter to the perceived
central bank aim to curtail peso currency strength.
"It remains to be seen how effective this new
(dollar-buying) measure is to curb the peso's appreciation,"
said Gustavo Ber, an economist at Estudio Ber, citing the appeal
of high-yielding domestic bonds to foreign investors.
Domestic bond buying by foreigners has the effect of dollars
chasing pesos, which tends to strengthen the Argentine currency.
A prevalent market view is that a weakening of the peso
would spur grain exports since farmers would reap more pesos for
their shipments abroad.
"Some farmers are waiting for the dollar to increase in
value (against the peso) before selling," said David Hughes, a
farmer serving as president of Argentina’s Argentrigo wheat
For the short term, the central bank has not laid out
dollar-buying plans, but its medium-term goal is to purchase
more hard currency.
Last month, the president of the central bank, Federico
Sturzenegger, said the bank sought to boost international
reserves to 15 percent of gross domestic product, up from 10
percent currently, as the country eyes an investment grade
(Additional reporting by Hugh Bronstein, Luc Cohen and Hernan
Nessi, Editing by W Simon)