Photo via AFP PHOTO/Luis ACOSTA

Once again, the dollar has taken an unexpected turn and the impacts on Argentina’s financial entities is noticeable. The country is reeling after being categorized as a frontier economy made the MERVAL drop 5.2 percent, this decrease adds to the previous week’s losses that kicked off a downward trend in the stock market. Consequently, the dollar went up almost 30 cents against the peso making the third consecutive increase in the value of the dollar in June.

Financial analysts were hoping that the changes the new administration had been making regarding the economy, specifically the impact of the unusual 100-year bond it issued, the entity would categorize the 3rd largest economy in Latin America under “emerging” status. MSCI, on its side, added that although Argentina fulfills all the requirements to be in the next category, more time is needed to consider these improvements longlasting.

 

This rise is considered a reaction to not only the problems associated with being deemed a frontier economy but also to the volume of cash in circulation. Due to this, along with other factors, there is be more potential for people to buy dollars, which could drive up the dollar to peso price even more.

The Argentinean Central Bank is selling the dollar at AR $16.57, after reaching AR $16.65 per 1 US dollar today.

The last time the dollar price exceeded $16.41 was in May with the Brazilian crisis rattled regional markets. However, to be clear, according to many analysts alarm bells won’t start ringing until the dollar crosses the AR $17 mark.