Key Insights
- Argentina has devalued the official peso rate by 18%.
- The Central Bank of the country raised the key rate to 118%.
- Such a decision will increase political instability ahead of the presidential elections in Argentina.
Argentina devalued the official rate of the peso by about 18%, to 350 pesos per dollar. Also, the Argentine regulator raised the key rate from 97% to 118%.
Argentina devalues peso after Peronist coalition came third in primary elections
The Argentine authorities have acknowledged that they have run out of opportunities to protect the volatile exchange rate amid the depletion of reserves after losing the primaries before the presidential election.
Argentina’s international reserves are at their lowest level in 17 years, and its liabilities exceed net assets.
The decision to devalue is likely to cause inflation and increase political instability ahead of the presidential election, which is scheduled for October 22.
In June, inflation in Argentina accelerated to more than 115%.
On Sunday, August 13, key primary elections were held in Argentina. They were won by the far-right libertarian candidate Javier Miley: after processing 90% of the ballots, he scored 30.5% of the vote.
The ruling alliance “Union for the Motherland” took only third place: 27% of voters voted for the Minister of Economy Sergio Massa and his competitor within the alliance, Juan Grabois.
Second place was taken by the opposition coalition “Together for Change”, which put up former security minister Patricia Bullrich and Buenos Aires Mayor Horacio Larreta in the primaries: together they scored 28%.
After the devaluation, the path to the second round of elections for Sergio Massa became noticeably more complicated, given the unpopularity among Argentine consumers.
In Europe, the Argentine peso is one of the three worst-performing currencies in emerging markets. In addition, the Russian ruble and the Turkish lira were included in this trio.
On August 14, the Nigerian naira fell against the dollar to its lowest level since March 2022. At the black market, MarketsXplora gathered that the dollar was exchanged at N945.00 and sold for N950.00 amidst high forex demands in the country.
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