Argentina peso shut down over confusion of true currency value
Argentina’s capital controls are taking their toll, with traders and investors worried over a widening gap between the country’s official and parallel exchange rates, the Financial Times reports.
President Mauricio Macri imposed capital controls to stave off default amid investor panic after his unexpected primary election defeat.
Since then the market for non-deliverable forwards, or futures contracts on the peso, has effectively shut down, reflecting confusion over the currency’s true value.
Big investors in Argentine assets, including Goldman Sachs and Pimco, warned the Emerging Markets Traders Association this week of the damaging impact of the 15% gap between Argentina’s official and unofficial exchange rates in NDFs.
The country’s NDF market has a turnover of between $150 million and $400 million a day, and has about $5 billion outstanding, but trading seized up almost entirely when the EMTA flagged its concerns on Wednesday.
Just $528 million of Argentine NDFs and other derivatives trade daily, a fraction of the $7.6 billion that change hands each business day across the border in Chile, according to the Bank for International Settlements.