Argentine Treasury Intervened in Currency Market Amid Election Uncertainty
buenos Aires – Argentina’s Treasury recently utilized approximately US $3 billion in reserves-accumulated from recent purchases following saver stock departures-to temporarily stabilize the foreign exchange market, according to BCRA Director Federico Furiase. The intervention occurred during a period of heightened political volatility and “liquidity problems” that Furiase clarified “do not represent the proper functioning of the market.”
Furiase stated the Treasury possesses “the ammunition…and the degrees of freedom [to intervene].”
The intervention coincides with crucial provincial elections that JP Morgan has labeled “crucial,” outlining two potential scenarios with considerably different economic implications.
JP Morgan projects that a close Kirchnerism victory (within 5 percentage points) or a Freedom Advances win would likely alleviate pressure on the dollar and potentially lead to a decline in real exchange rates even before national midterm elections in October, potentially boosting economic activity in the fourth quarter.
Conversely, a Patria Force victory by more than five points could push the exchange rate to the upper limit of the current band, reaching $1460. JP Morgan assigns a low probability to this outcome, barring exceptionally low voter turnout (50% or less).
