BUENOS AIRES Feb 11 Argentina's peso took a
breather from its rollercoaster ride in recent days, steadying
on policy changes that boosted dollar supply in local markets,
though analysts warned the respite was likely to be temporary.
The official peso closed on Tuesday at 7.81 to
the U.S. dollar, and has risen around 4 percent since late
January's devaluation, when it lost 12 percent in one day.
The parallel black market peso has followed a
similar pattern, trading at around 11.7 to the dollar on
Tuesday, considerably stronger than the 13.1 it hit on Jan. 23.
In a rainy street in central Buenos Aires, the few customers
approaching the illicit exchange traders looked largely to be
The Argentine government, which has been dipping into its
dwindling reserves to bolster the currency, is hoping a
combination of policy tweaks and business cash can keep the peso
steady until an expected flow of funds in March from crop sales.
Meanwhile, it continues to intervene and the reserves are
still falling, down to $27.74 billion as of Monday evening.
That will cover less than five months of imports, said
Capital Economics economist David Rees, adding that at its
current rate the government would burn through to the widely
suggested minimum level of three months of import coverage by
"The bottom line is that Argentina remains in the grip of a
low-burning balance of payments crisis," he said.
Last week, the central bank limited the net foreign currency
positions of local banks, helping to push more dollars into the
market. More good news for the government came from the cereal
firm industry, which promised to liquidate $2 billion into the
local market in February.
The central bank has also allowed interest rates on some
peso-denominated notes to rise, while the loosening of limits on
purchasing dollars for savings had taken some pressure off the
peso, said Credit Suisse in a note to clients.
In March, when the soy harvest begins in earnest in
Argentina, farmers will re-start sales and bring in more cash to
the world's No.3 soybean exporter and top soymeal supplier.
But later in 2014, once the harvest inflows subside, the
pressure would be on again, Credit Suisse said.
"Despite some positive aspects of the policy response
following January's devaluation, Argentina's current economic
situation is unsustainable in our view," it said, adding that it
expects another devaluation in the fourth quarter.