Political Risk Latin America Blog @PolRiskLatam

Fernandez Makes Peso the Only Loser in Emerging Markets: Argentina Credit

Posted in News and Articles, Political Risk by politicalrisklatam on September 27, 2010

by Drew Benson and Ben Bain for Bloomberg, September 27th, 2010.

Argentine President Cristina Fernandez de Kirchner ’s efforts to weaken the peso are working, while policy makers in emerging markets from Brazil to South Africa fail to curb currency rallies.

The peso has declined 0.7 percent in the past three months against the dollar, the only retreat among 25 emerging-market currencies tracked by Bloomberg. South Africa’s rand gained 8.9 percent and Brazil’s real rose 4.2 percent even as their central banks stepped up dollar purchases to stem the appreciation.

Argentine central bank President Mercedes Marco del Pont said Sept. 2 that the institution seeks to maintain a “competitive” exchange rate after dollar inflows climbed to a two-year high of $392 million in the second quarter, the second time since 2008 that flows were positive. The bank, which doesn’t target a benchmark lending rate, buys dollars in the local foreign exchange market and limits appreciation by requiring investors deposit 30 percent of the funds brought into the country for one year.

Argentina is “definitely bucking the trend because they’re able to intervene aggressively,” said Aryam Vazquez, an economist with Wells Fargo & Co. in New York. “It’s a little bit more challenging for a country like Brazil, for example, which attracts a heavy amount of capital.” (continue reading… )

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