EMERGING MARKETS-Argentina’s informal peso plunges on economy ministry changes


By Susan Mathew and Sruthi Shankar

July 4 (Reuters)Argentina’s black market peso slumped more than 14% on Monday after the abrupt resignation of long-standing economy minister Martin Guzman, while the new minister attempted investors pledging a “sustainable fiscal program”.

Argentina’s nnewly appointed economy minister Silvina Batakis and central bank head Miguel Pesce said they would continue working on accumulating reserves and agreed on the need to strengthen local capital markets, the central bank said.

The formal peso ARS-RASLheavily restricted by capital, was last down 0.4% at 125.96, while the closely-watched black market peso ARSB= crashed to 280 per dollar before clawing back to 268.

Batakis, close to Argentina’s powerful vice president Cristina Fernandez de Kirchner, is an economist and government official.

She was appointed after Guzman, a moderate and the architect of Argentina’s $44 billion deal with the International Monetary Fund, quit amid rising tensions within the ruling Peronist coalition.

With inflation above 60%, a high fiscal deficit, rising fears about debt defaults and savers losing faith in the peso currency, Batakis faces an uphill battle.

“We think that Silvana Batakis’s appointment is unlikely to be enough to fix (Argentina’s) issues, and hence it may fall short in stabilizing sentiment. Moreover, we believe her more unorthodox profile may work against calming expectations,” said Citigroup analysts Fernando Jorge Diaz. and Ivan Stambulsky.

Argentina’s OTC bonds fell an average 2.5% in thin trading, while the Merval stock index .MERV slumped up to 3.4% before cutting a chunk of its losses.

William Jackson, chief emerging markets economist at Capital Economist said the rising influence of Fernandez de Kirchner could lead to a looser fiscal stance, accompanied by higher inflation and tighter capital controls.

“A default is starting to lookThis would move Argentina further away from the path towards macro stability….”

Among other regional currencies, Chile’s peso CLP= firmed 0.5% to trade at 927.50 per dollar, recovering from an all-time low of 939.60 hit on Friday.

A stronger dollar, sliding prices of copper – Chile’s top export, and protests at its biggest mining company Codelco have all hurt the currency this year. MET/LFRX/

Chile’s constitutional assembly handed over the final text of a proposed new constitution to President Gabriel Boric on Monday, with the final vote due on September 4.

The Brazilian real BRL= and the Mexican peso MXN= made small moves against a weaker dollar, with a holiday for US markets making for a quite trading session.

Colombian markets were closed for a local holiday.

Key Latin American stock indexes and currencies at 1842 GMT:

Stock indexes

Latest

Daily % change

MSCI Emerging Markets .MSCIEF

992.73

-0.01

MSCI LatAm .MILA00000PUS

2033.37

0.48

Brazil Bovespa .BVSP

99101.43

0.15

Mexico IPC .MXX

48234.53

1.03

Chile IPSA .SPIPSA

4978.58

-0.3

Argentina MerVal .MERV

89,369.59

-0.756

Currencies

Latest

Daily % change

Brazil real BRBY

5.3203

0.00

Mexico peso MXN=D2

20.2991

-0.24

Chile peso CLP=CL

927.5

0.26

Peru sol PEN=PE

3.8237

0.22

Argentina peso (interbank) ARS=RASL

125.9600

-0.38

Argentina is crisis again https://tmsnrt.rs/3NHzWFF

(Reporting by Susan Mathew and Sruthi Shankar in Bengaluru;)

((susan.mathew@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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