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UPDATE 1-Argentina's black-market peso slides past 9 per dollar
April 25, 2013 / 8:26 PM / 4 years ago

UPDATE 1-Argentina's black-market peso slides past 9 per dollar

BUENOS AIRES, April 25 (Reuters) - Argentina’s black-market peso slid past 9 per dollar on Thursday in minimal trade volume, reflecting stubborn private demand for greenbacks amid a virtual ban on foreign currency purchases.

The spread between the black-market rate and the official exchange rate widened to 77 percent.

Economists say investors are putting off projects due to financial uncertainty, which includes speculation about a devaluation after October mid-term elections even though government officials reject this.

The black-market peso closed down 2.7 percent at a record-low bid price of 9.16 per dollar, according to Reuters data. This contrasted with the official interbank exchange rate, which remained unchanged at 5.1725 per dollar .

Traders said business was practically frozen due to rumors that tax agency officials were monitoring the black market.

But they said demand is strong because investors want to drop their pesos, whether by buying dollars or stocks and bonds. The MerVal blue-chip stock index closed at a record high on Thursday.

“The underlying issue is that growing numbers of people want dollars. Today buying dollars is the most profitable investment around,” economist Rodrigo Alvarez told reporters.

Another economist, former Finance Secretary Miguel Kiguel, said the black market “is very small in size but very big in terms of its impact on long-term investments.”

Inflation of roughly 25 percent a year and mounting fears that the peso could start depreciating at a faster rate have spurred Argentines to seek refuge in dollars. The country has a long history of devaluations and economic crises.

Soon after President Cristina Fernandez won re-election in 2011, her government imposed limits on foreign currency purchases to stem capital flight. The controls were tightened and savers cannot buy dollars at the official rate.

Latin America’s No. 3 economy grew 1.9 percent last year versus 8.9 percent in 2011.

The central bank intervenes regularly to keep the peso from swinging sharply on the official market. Fernandez herself has dismissed the possibility of a deeper devaluation.

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