Photo from ámbito.com.
The Argentine peso exchange rate rose by 17 centavos to a historic high this morning, topping AR $17.56 to sell and $17.14 to buy, according to ámbito.com. The surge came one day after the Central Bank (BCRA) raised interest rates on its short term bonds, known as Lebac, to 26.5 percent annually and injected AR $81,000 million into the market.
The record is less extreme than it sounds, according to finance management consultant Héctor Cosentino. “In the wake of the Central Bank’s decision yesterday, the dollar inevitably rose,” he said. “But through the firepower of monetary authorities, it will end up stabilizing around AR $17.40 by the primary elections.”
This wholesale rate will still break previous records.
“This is a smart move leading up to the PASO,” Consentino said in reference to next month’s primary elections for congressional representatives and senators (Primarias Abiertas Simultáneas y Obligatorias).
Consentino made additional comments stating that if Macri’s Cambiemos party gains seats, it will use the depreciated peso to reactivate the economy.  If it loses seats, it may allow the peso to continue to depreciate through the rest of 2017
The 17-centavo jump is the highest in two months after the dollar rose 42 centavos to AR $16.03 in May amid the Lavo Jato corruption scandal implicating the Brazilian president, sending Argentina’s most important trading partner into yet another period of economic instability.
The market seems to be demanding more dollars as expectations for the elections and ensuing tax reforms generated upward pressure on the dollar.
Yesterday will be the last time the Central Bank raises interest rates before the PASO.