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Argentina rules out second devaluation of peso
August 28, 2014 / 12:05 PM / 3 years ago

Argentina rules out second devaluation of peso

BUENOS AIRES, Aug 28 (Reuters) - Argentina on Thursday ruled out a second sharp devaluation of the peso this year, despite heavy pressure on the local currency as savers and companies faced with high inflation and the country’s default scrabble for dollars.

The government implemented a shock 20 percent devaluation of the peso in January, although President Cristina Fernandez had previously sworn this would never happen under her watch.

The widening gulf between the official rate and the black market rate since Latin America’s third-biggest economy defaulted on its debt have fuelled expectations of another hefty intervention.

The head of the influential Industrial Union of Argentina, Hector Mendez, said earlier this month the peso should trade at 10 per dollar at the official rate to provide exporters with a cushion against one of the world’s highest inflation rates.

Speaking about calls for a devaluation, Argentine Cabinet Chief Jorge Capitanich said “obviously this will not happen”. The government has said a devaluation would fuel inflation, which private economists already see running at more than 30 percent this year.

The peso has tanked 1.37 percent to 8.4 since Fernandez unveiled plans to skirt U.S. court rulings that prevent Argentina’s servicing its debt until the country settles with U.S. hedge funds demanding full payment on their bonds. The currency has fallen 22.4 percent this year.

On the black market, the peso has fallen even more, dropping by 8 percent since Fernandez’s announcement and by 30.2 percent this year to 14.33 per dollar. The so-called “blue peso” has dropped 11.7 percent in August alone.

Argentina missed a June interest payment after U.S. District Judge Thomas Griesa blocked a coupon payment owed to holders of debt that was restructured after the country’s 2002 default on $100 billion in debt. (Reporting by Jorge Otaola; Writing by Sarah Marsh; Editing by Chizu Nomiyama)

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