BUENOS AIRES (Reuters) – Argentina’s peso closed 6.6% higher on Wednesday, regaining ground lost after the currency tumbled on a lifting of capital controls earlier in the week.
The currency closed the week, shortened due to the Easter holiday, at 1,125 pesos per U.S. dollar. That was 4.4% below the previous week’s closing price.
On Monday, the peso tumbled after the government undid large parts of years-long capital controls, putting it in a gradually expanding band starting between 1,000 and 1,400 pesos per dollar.
Since then, the currency has shown signs of normalization, surprising analysts.
Supporting the stabilization, fixed-term deposit rates also rose, from 28% to 30% on Friday to 35% to 37% on Wednesday.
“Rates in pesos are once again above the implied rates of dollar futures, which would leave the exchange market facing an excess flow of dollars that could lead to an appreciation of the peso,” said economist Gustavo Ber.
Libertarian President Javier Milei, who championed scrapping the currency controls, ruled out on Wednesday the central bank intervening, unless the peso breaks the 1,000 per dollar floor.
“There will be no intervention until it reaches the floor,” Milei said on X. “That means, no (foreign-reserve) purchases will be made until 1,000 pesos per dollar.”
Argentina’s foreign reserves have climbed in recent days, after first receiving $12 billion as part of a $20 billion deal with the International Monetary Fund on Tuesday and then another $1.5 billion from a branch of the World Bank.
That provisionally brought the reserves up to $38.61 billion at end of day on Wednesday.
Capital Markets Argentina said that “the agreement with the IMF will also provide strong dollar support to the central bank,” adding that it will increase confidence in the new exchange-rate scheme and in the currency remaining within its predetermined band.
(Reporting by Jorge Otaola and Walter Bianchi; Writing by Aida Pelaez-Fernandez; Editing by Kylie Madry, Deepa Babington and Sandra Maler)
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