BUENOS AIRES (Dow Jones)–Argentina’s peso eased slightly against the U.S. dollar in the first day of trade this week, as the central bank continued to snap up dollars to re-stock foreign reserves.
The peso closed at ARS4.2975 to the U.S. dollar on the MAE local foreign-exchange wholesale market compared to ARS4.2920 on Friday.
The central bank stepped into the market buy $100 million Tuesday, pushing the peso lower, local currency trader Puente said in a note to clients.
The central bank regularly steps in to the local currency market to keep the peso trading within a tight band relative to the greenback.
Up until last week, there was heavy demand for dollars as local residents were betting the government was going to pick up the pace of the peso’s depreciation following President Cristina Kirchner’s landslide re-election at the end of October.
However, the government said repeatedly that it would hew to the policy of a slow, moderate weakening of the peso and took heavy-handed steps to stem dollar demand and capital flight.
The government started requiring businesses and individuals to receive authorization from the tax agency before purchasing foreign currency and forced oil, gas and mining companies to repatriate the proceeds of their sales abroad. Those measures–in addition to incoming dollars from grain exports–caused dollar buying to plunge and have allowed the government to start rebuilding the reserves they had to tap to meet demand for dollars through November.
Reserves had grown to $46.27 billion by Friday, up from $46.09 billion the previous day. Over the past two weeks the government has been able to buy about $2 billion.
«The controls the government implemented…are allowing for comfortable management of the exchange rate with a significant accumulation of the excess dollars generated,» Puente said.
Meanwhile, stocks edged lower Tuesday, with the Merval index of leading shares sliding 0.37% to 2,457.37 points. Volume was relatively heavy at 55 million pesos ($13 million).
The Global X FTSE Argentina 20 exchange-traded fund, which tracks shares of Argentine companies listed on international markets, was unchanged at $10.89 in New York.
Selling focused on banking group Grupo Financiero Galicia (GGAL, GGAL.BA), which shed 3.5% to close at ARS2.79.
Grain exporter Molinos de La Plata SA (MOLI.BA) rose 4.5% to ARS31.55 due to sharp gains in global soybean and corn prices Tuesday.
Bonds were mixed. The 2014 peso-denominated badlar bond eased 0.2% in price terms to ARS106.25 with the yield at 21.85%.
The 2035 peso-denominated GDP warrants were in high demand Tuesday, rising 4.4% to ARS11.60.
-By Shane Romig, Dow Jones Newswires; 54-11-4103-6738; shane.romig@dowjones.com
Source: Dow Jones