A man walks by an electronic board showing exchange rates in Buenos Aires' financial district. May 7, 2018. (REUTERS/Marcos Brindicci)

After initially gaining on the US dollar, the peso has closed slightly down against the greenback in the first day of trading since last week’s roller coaster of volatility.

Following the measures announced last week and the Central Bank’s decision to force financial entities to sell up to US $2 billion on the foreign exchange market, the peso closed on 22.30 to the dollar, down 0.22 percent on the close from last Friday. Also today, the dollar index, a measure of the US currency’s performance against a basket of currencies, hit a four-month high – in anticipation of increased US interest rates kicking in later this year.

After a wild week that saw the peso reach historical nominal lows and then make up ground once again to close at 22.28 to the US dollar, early trading had seen Argentina’s currency gain 0.35 percent percent to 22.20, but the trends were reversed by the end of the day.

Coming on the heels of steep interest rate hikes and ministerial promises to cut spending and tougher fiscal deficit targets, a Central Bank (BCRA) resolution that limits the amount of foreign currency that financial institutions to 10 percent of their total position came into effect today.

Previously, the limit was at 30 percent. Infobae has estimated that as a result of the resolution up to US $2 billion is set to be sold – a move that the BCRA hopes will slow down the demand for dollars at least in the short term.

However, Ámbito has reported that the banks did not sell their dollars today as expected.

Argentine Central Bank Resolution on Foreign Currency Holdings for Banks, Financial Institutions by The Bubble on Scribd

Possibly counteracting the sell-off by local banks is the fact that there are reportedly still some US $1 billion in LEBACs – short-term bonds issued by the BCRA – held by foreign investors, who must now pay tax on the earnings of those bonds. Part of the rush to drop the peso last week was a result of the tax kicking in, along with other internal and external factors.

Last night Treasury Minister sought to reassure Argentines, saying “the dollar can increase or decrease. Its fluctuations in the past month were similar to what happened with other currencies. Our idea is to have little volatility, but also knowing we have a floating currency, and if the currencies of the countries we compete with to export move, ours will too, because it is the way we have to prevent the loss of jobs, of sustaining economic growth.”