The Argentine Central Bank today devalued the peso by 22% in the official wholesale exchange rate in the first operations, according to market operators, after the surprise victory of the far-right Javier Milei in the primaries held this Sunday, which had a negative impact on the markets.
The wholesale exchange rate was quoted at 350.05 pesos for sale at the beginning of this day, according to market operators, after having closed at 287.35 pesos last Friday.
Argentina applies strong restrictions in the exchange market, which forces the official dollar to trade at half of the parallels, therefore, the market expected the Argentine government to comply with a demand from the International Monetary Fund (IMF) and apply an exchange jump on the wholesale price to close that gap.
The Argentine Central Bank also raised the monetary policy rate by 21 percentage points, so that the annual nominal interest rate of the 28-day Liquidity Bills (Leliq) went to 118% (or 209% in effective annual terms). ).
“The monetary authority considers it convenient to readjust the level of interest rates of the monetary regulation instruments, in line with the recalibration of the level of the official exchange rate,” said a statement from the Central Bank.
The Central Bank explained that the purpose is “to anchor exchange expectations and minimize the degree of transfer to prices, tend towards positive real returns on investments in local currency and favor the accumulation of international reserves.”
In the parallel market, the informal (or blue) exchange rate jumped 75 pesos today in the first operations and, after closing at 605 last Friday, at the opening it rose 680 pesos per unit, while the so-called “financial dollars” , which are operated via bonds, rose between 7% and 12% to values ??that reached 645 pesos.
The surprising result that gave Milei the winner, who proposes to dollarize the economy, eliminate the Central Bank and cut public spending, this beginning of the week brought significant pressure on the exchange market and the fixed and variable income markets.
Although Milei – who obtained 30.04% of the votes (with 97.4% counted) – is a “pro-market” candidate, the market has not liked the electoral results, stock market operators reiterate, and as of today uncertainty.
La Libertad Avanza, Milei’s formation, was the most voted to compete in the presidential elections on October 22, leaving the opposition coalition Juntos por el Cambio (center-right) in second place, with 28.27%, where the former minister of Security Patricia Bullrich prevailed within her coalition, and in third place the ruling party of Unión por la Patria (Peronist) finished, with 27.27%, which will have the Minister of Economy, Sergio Massa, in the fight.
