Argentine Peso Gains as Exporters Bring Dollars After Free Float

  • Currency rebounds after plunging as much as 30% on Thursday
  • Importers holding off on purchases as they await new rules

Argentina’s peso climbed for a second day after Thursday’s devaluation as grain exporters bring dollars to the country while importers held off on purchases of greenbacks as they awaited the implementation of new rules for accessing the market.

The peso rallied 3.8 percent to 12.76 pesos per dollar at 2:22 p.m. on the MAE electronic platform in Buenos Aires, rebounding from a tumble of as much as 30 percent Thursday after newly elected President Mauricio Macri lifted currency controls as part of a pledge to kick start economic growth by implementing free-market policies.

The peso is gaining because farmers, who had withheld crops in stored bags as they waited for a better exchange rate, have sold their goods while importers aren’t using the market, according to Alejo Costa, the head of research at brokerage Puento Hnos Sociedad de Bolsa SA. This is leading to an oversupply of dollars among traders.

"The flows are limited on the demand side," Costa said from Buenos Aires. "There isn’t an idea on where the exchange would be if everything was operating freely."

A new system of automatic approval for imports announced by Macri isn’t yet "well-oiled," Costa said. In addition, several large importers aren’t participating in the currency markets because they plan to purchase a bond announced by the Finance Ministry late Friday, he said. The sale would give importers a way to access dollars to send overseas.

A lack of dollar demand from individuals who are spending their free cash on Christmas gifts is also skewing the exchange rate, Costa said. Cristina Fernandez de Kirchner’s government had installed monthly limits to how many greenbacks individuals could buy for savings or tourism, leading to the emergence of a black-market for dollars to cope with the pent-up demand.

"The risk now is that this is generating an undershooting of the peso," Costa said.

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