Argentina's black-market peso pierces barrier of 10 per dollar

BUENOS AIRES Tue May 7, 2013 3:25pm EDT

BUENOS AIRES May 7 (Reuters) - Argentina's black-market peso slid past the key psychological barrier of 10 per U.S. dollar on Tuesday in thin trade, reflecting persistent demand for greenbacks amid tough currency controls.

The peso slumped 2.1 percent to close at a record-low bid price of 10.04 per dollar on the black market, as measured by Reuters. This marks a 93 percent spread over the official interbank peso, which was trading at 5.21.

Argentina's center-left government virtually banned foreign currency purchases a year ago to stem capital flight as well as safeguard dollars to pay for imports and repay debts.

A news conference by the government's economic team was called for 1900 GMT. No information about what they might announce was available.

Dollar demand has increased due to inflation estimated at roughly 25 percent a year by private economists and mounting fears the peso could start depreciating at a faster rate. The South American country has a long history of devaluations and economic crises.

"With this nervousness and having pierced the psychological barrier of 10 pesos, it could be that economic theory is turned upside-down and this spurs more demand, or a herd effect," said Roberto Drimer, director of Vatnet financial consultancy.

"It's a relatively small market, with strong demand and supplies that are not as generous as expected for this time of year," Drimer added.

President Cristina Fernandez dismissed the possibility of a devaluation during a nationally televised speech late on Monday, arguing this would only favor exporters and hurt the poor.

"Those people who aim to make money with a devaluation at the people's expense are going to have to wait for another government," Fernandez said.

A news conference by the government's economic team was called for 1900 GMT. No information about what they might announce was available.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.