The peso appreciated against the dollar today, closing at 24.68 – 3.25 percent higher than yesterday – on a day in which the Central Bank and government moved to shore up the peso on multiple fronts.
Seeking to stabilize the peso as AR $617 billion in LEBACs expired today, the Central Bank (BCRA) once again offered to buy US $5 billion at AR $25 to the US dollar. That was matched by operations in the dollar futures markets as well as the re-opening of the fixed-rate BOTE (Treasury Bonds) to soak up spare pesos and to entice investors to take on peso-denominated debt.
The announcement, made today by the Finance Ministry, sets out bonds that come to maturity in 2023 and 2026 and pay fixed annual nominal interest rates in pesos of 16 and 15.50 percent, respectively. El Cronista has reported that the debt offering managed to attract foreign investors with dollars, contributing to the peso’s appreciation today.
The BCRA strategy to offer pesos at 25 pesos to the dollar, a repeat of that implemented yesterday by the monetary authority, had in early trading today ensured that the peso has remained relatively stable. As such, at 11 AM the BCRA was estimating an average exchange rate of 25.53 pesos to the dollar. The rate subsequently moved in favor of the peso, closing at 24.68 – the first time that peso has strengthened since May 4.
Yesterday, US $408 million of a US $5 billion tranche offered by the BCRA was bought up, and the peso closed at a new historic low against the greenback after another dramatic slide. At the end of trading, the BCRA’s weighted average of exchange rates indicated that the rate was 25.51 pesos to the dollar, a 7.5 percent single-day slide that dwarfed the other single-day losses suffered by the peso since it first began to lose value in late April.
The approximately US $26.84 billion in LEBACs – short-term debt issued by the Central Bank – has been a subject of speculation for days as there has been uncertainty over to what extent investors will rollover the debt or seek to ‘dollarize’ their holdings. Ahead of today’s test, the BCRA had been buying back LEBACs.
Estimates for the proportion of LEBACs settled or rolled over were not yet available.