May 8, 2013 / 8:51 PM / 6 years ago

Argentina's black-market peso sinks after tax amnesty unveiled

BUENOS AIRES, May 8 (Reuters) - Argentina’s black-market peso shed another 3.5 percent against the dollar on Wednesday, reflecting doubts over a tax amnesty plan aimed at luring people into investing their undeclared dollars to ease pressure on the currency.

The peso closed at a record-low bid price of 10.40 per dollar on the black market, as measured by Reuters.

This is double the rate of the official interbank peso, which ended virtually unchanged at 5.2125. Such a wide gap between the black-market and official exchange rates has not been seen in Argentina since the 1970s, traders said.

“Buyers are completely dominating the market but there isn’t much trade because they aren’t many sellers,” a market source said on condition of anonymity.

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.

Argentina on Tuesday urged middle-class dollar savers and rich investors holding assets overseas to declare their greenbacks through a tax amnesty plan meant to shore up the wobbly peso.

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

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

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