Seeking to stabilize the peso as AR $617 billion in LEBACs expire today, the Central Bank (BCRA) has once again offered to buy US $5 billion at AR $25 to the US dollar.
The strategy, a repeat of that implemented yesterday by the monetary authority, has 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.
Yesterday, only 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.
According to financial newspaper El Cronista, the market interpreted yesterday’s move by the BCRA as a way to discourage LEBAC holders from transferring their assets into dollars.
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 has been buying back LEBACs.
Financial daily Ámbito Financiero has reported that the government estimates that about US $5 billion in LEBACs held by non-resident investors will not be rolled over, explaining in part the decision by the BCRA to offer the equivalent amount.