Argentina's black market peso plummets as libertarian Milei secures presidential win
Argentine coins of 1 and 2 pesos are pictured in Buenos Aires, Argentina.
Days after libertarian Javier Milei's triumph in Argentina's presidential election, the black-market peso tumbled by 12 per cent to 1,045 per dollar, Reuters reported on Tuesday.
Simultaneously, local stocks and bonds experienced a surge fuelled by expectations of a more market-friendly economic approach. Argentina's S&P Merval stock index surged by 23 per cent, with state energy firm YPF's shares rising by nearly 39 per cent, reflecting optimism amid hints of potential privatisation under Milei's administration.
Milei has proposed economic policies that include significant spending cuts. This has driven the weakening of peso in the black market, reaching 1,045 per dollar compared to the official exchange rate of 356 per dollar. Speculations around Milei's economic plans, potentially involving a peso devaluation or a parallel use of the peso and US dollar, have contributed to uncertainties in the local currency market.
While international bonds saw a second consecutive day of gains, reaching as high as 1.7 cents on the 2029 note, equities faced fluctuations. The Global X MSCI Argentina ETF dipped slightly after a significant jump on Monday, while US-listed shares of Argentine banks maintained substantial gains.
The S&P Global Ratings analysts have noted Argentina's imminent policy shifts under Milei, emphasising the country's historical tendency for substantial policy swings with changing governments.
Milei, known for his critiques of major trading partners China and Brazil, has promised drastic economic reforms, with his presidency commencing on December 10.
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Despite earlier indications of favouring complete "dollarisation", Milei's first speech did not reference such a move, leaving questions about the speed of peso abandonment.
Morgan Stanley analysts anticipate an 80 per cent drop in the peso over the next six weeks, reflecting concerns about the currency's future under Milei's administration.
(With inputs from Reuters)
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