Statements from Buenos Aires and Washington aligned holdings with asset purchases and slight improvements for the peso compared to the turbulent past few days.
Argentina's financial market rose on Thursday after the country's economy minister announced that negotiations with the International Monetary Fund (IMF) are underway for a new US$20 billion loan, amid currency pressure and investor uncertainty.
Statements from Buenos Aires and Washington aligned holdings with asset purchases and slight improvements for the peso compared to the turbulent past few days.
"I think what was done today (Thursday) was to announce the amount of an agreement that has not yet been agreed upon (with the IMF), due to the need to calm what we're seeing these days with the central bank's (BCRA) reserves," said economist Christian Buteler.
Domestic markets faced turbulent trading as fears of a possible devaluation resurfaced with the projected end of foreign exchange restrictions (cepo) and political tensions, which led the Central Bank to sell US$1.361 billion in the last eight sessions alone.
The country risk index fell 14 points to 755 basis points (15:15 GMT), as the Buenos Aires stock market saw a 0.5% gain on its benchmark S&P Merval index and over-the-counter sovereign debt improved by an average of 0.3%.
The importance of the risk benchmark developed by JP Morgan bank lies in the fact that it indicates the difference in the rate to be paid based on the volatility of parities between US and Argentine bonds.
The South American country is negotiating a $20 billion agreement with the IMF, Economy Minister Luis Caputo said before the markets opened, following another $44 billion loan signed in 2018.
The IMF spokesperson confirmed the discussion of a "considerable" loan with Argentina, but made no reference to the amount announced earlier by the Argentine government.
The wholesale peso fell a slight 0.05% to 1,071.75 per dollar with the direct intervention of the BCRA through a controlled devaluation ( crawling peg ) of 1% per month.
Meanwhile, in other alternative bands the currency fluctuated selectively at 1,299.4 units in the "CCL", at 1,296.7 in the "MEP" dollar and at 1,300 units in the marginal (blue).
The government of libertarian Javier Milei asserts that the new agreement will strengthen the Central Bank's accounts and allow the country to begin to undo the current exchange restrictions (cepo) that hinder business and investment.
Caputo told business leaders that he will request additional freely available funds from other international organizations and that these agreements will increase the BCRA's gross reserves to US$50 billion, up from the current US$26.25 billion.
These additional negotiations are with the World Bank (WB), the Inter-American Development Bank (IDB), and the Development Bank of Latin America and the Caribbean (CAF), Caputo said.
"We believe that the dynamic we saw last week—the dollar gap, rising dollar futures, and BCRA sales—could continue until there is clarity or clues about what the exchange rate structure will look like under the agreement with the IMF," reported the consulting firm Portfolio Personal Inversiones (PPI).
The Argentine Treasury is auctioning several short-term bonds today to settle domestic debt maturities. It offers a savings option tied to the exchange rate as a sign that there is no official speculation about currency devaluation, traders said.
