Bloomberg BUENOS AIRES (Bloomberg) — The Argentine peso fell to a record low as the central bank changed its strategy to protect the currency and the International Monetary Fund said it won’t set any exchange-rate targets for a stand-by arrangement.
The peso dropped 6.9 percent to 24.99 per dollar to close in Buenos Aires, pushing the decline this year to 26 percent, the worst in emerging markets. The central bank offered $5 billion at 25 pesos per dollar at the open of trading at 10 a.m.
The central bank is said to be sending a signal to traders that the peso can fall, but that there is a limit, according to a person with direct knowledge who couldn’t speak on the record.
That’s a departure from the strategy since April, where it has spent more than 10 percent of its reserves to stem a decline.
The central bank is scheduled to hold an auction on Tuesday where it wants to sell as much as $30 billion of notes to rollover before they expire on Wednesday. Argentina won’t have any problems with the auction, Finance Minister Luis Caputo said in Buenos Aires on Monday.
A spokesman for the IMF said the multi-lateral lender supports a free-floating exchange rate in Argentina and won’t set peso targets as a condition for a credit line currently under negotiation. The board will meet on Friday to discuss Argentina’s request for a standby arrangement. U.S. President Donald Trump told Argentine President Mauricio Macri on Monday that he supports the decision to turn to the IMF.
The government wants talks with the IMF to conclude sooner than the initial timeline of six weeks, Treasury Minister Nicolas Dujovne said at the same briefing with Caputo on Monday.
The government now sees economic growth slowing and inflation quickening, he said. The peso has now reached a “reasonable level” and Argentina hasn’t lost access to credit markets, Caputo said.
The peso’s 25 percent decline this year has fueled a selloff in all assets in Argentina, from credit to equity markets and forced companies to postpone initial public offerings and bond sales.
The central bank responded with three surprise rate hikes since mid-April, raising the key rate to the highest in the world. The government said it will narrow the primary fiscal deficit to 2.7 percent of gross domestic product from a previous target of 3.2 percent.