Argentine Peso Surges in Unregulated Market on Rule Change

Argentine Peso Surges in Unregulated Market on Rule Change
Argentina's peso rose 6.3 percent this week to 6.2876 per dollar in the so-called blue chip swap market at 2:57 p.m. Photographer: Diego Giudice/Bloomberg News

Argentina’s peso headed to its biggest weekly advance in 10 months in the unregulated market, the main vehicle for investors to get money out of the country, after regulators ordered mutual funds to use the official exchange rate to value assets denominated in foreign currency.

The peso rose 6.3 percent this week to 6.2876 per dollar in the so-called blue chip swap market at 2:57 p.m. Buenos Aires time. The rally is the biggest since the week ending Oct. 7, according to data compiled by Bloomberg. The rate is set by the difference in prices for securities in local markets and overseas. Investors skirt currency controls by buying assets in pesos locally and selling them abroad for dollars.

Argentina’s Securities and Exchange Commission issued a statement dated Aug. 7 mandating that mutual funds value investments abroad at the official exchange rate, which fell 0.1 percent today to 4.6013 pesos per dollar. Funds have eight days before the regulation goes into effect.

“This regulation basically makes mutual funds lose about 30 percent of the value of their dollar-denominated assets,” said Joaquin Almeyra, a trader at Bulltick Capital Markets in Miami. “That’s why they rushed to sell.”

Argentina’s Merval index fell 0.3 percent today after tumbling 3.2 percent yesterday, the most since April 17, as investors sold stocks used in the blue-chip trade. Petroleo Brasileiro SA plunged 8.5 percent yesterday, the biggest decline in a year.

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