Argentine peso slides despite world’s highest interest rates, IMF bailout

Locals
walk by an exchange office in Buenos Aires,
Argentina.
AP Photo/Jorge
Saenz

• The Argentine peso was down more than 1% against the
  dollar on Tuesday.
• Sweeping austerity measures and a $50 billion credit
  line have failed to prop up the currency.
• 
  Follow
  the peso in real time here.
  

The Argentine
peso continued to slide Tuesday, even after officials stepped
up efforts to support a historic International Monetary Fund
credit line that had been extended to the country earlier this
year amid a
spiraling economic crisis.  

Even a central bank rate hike to 60% last month has failed to
prop up the currency. The peso, which has shed about half
of its value this year and is the worst-performing
currency of 2018, was down 1.3% to 37.9500 against the dollar
around noon ET.

“The worsening of the situation in Argentina despite the rate
hikes and government efforts to restore market confidence
confirms our view that the situation is far from being solved,”
Nomura analysts led by Craig Chan wrote in a note. 

The government has been in talks with the International Monetary
Fund to speed up measures to stem the crisis. As part of a
historic bailout deal reached in June, the IMF has so far
extended $15 billion to the country and was expected to disburse
an additional $3 billion in September. 

Analysts are concerned IMF stipulations like austerity measures
could spark political backlash in Buenos Aires. President
Mauricio Macri and Finance Minister Nicolas Dujovne
rolled out sweeping economic reforms last week, including
stiff spending cuts and export tax increases. 

Those measures could deliver a political blow to the conservative
president, who campaigned on a free-market platform, ahead of
October 2019 elections. His approval rating has already been on
the rocks, dipping below 40% earlier this year.

“We expect markets to remain unnerved by the possibility that he
may not be re-elected next year – a situation that could put the
current macroeconomic adjustment program in jeopardy,” Chan
wrote. 

Markets Insider