Argentina will act to prevent 'irrational' run on peso, says new economy chief
By Hugh Bronstein and Hernan Nessi BUENOS AIRES (Reuters) - Argentina will not allow a chaotic fall in the peso and will use its dollar reserves to bolster the currency against the political uncertainty that erupted after the Aug. 11 primary election, Treasury Minister Hernan Lacunza said on Wednesday.
By Hugh Bronstein and Hernan Nessi
BUENOS AIRES (Reuters) - Argentina will not allow a chaotic fall in the peso and will use its dollar reserves to bolster the currency against the political uncertainty that erupted after the Aug. 11 primary election, Treasury Minister Hernan Lacunza said on Wednesday.
The central bank auctioned a total $94 million in reserves during the day, traders said. The bank has spent a total $709 million to bolster the peso since President Mauricio Macri was thrashed in the primary nominating contest by centre-left Peronist challenger Alberto Fernandez, who is now expected to win the Oct. 27 presidential election.
The peso closed 0.53% weaker at 55.03 to the U.S. dollar while local stock and bond prices rose slightly, suggesting that recent market jitters had begun to calm.
"We will not allow an irrational run on the currency. That's why we have international reserves," Lacunza told local radio station Mitre in an early morning interview, less than 24 hours after being sworn in as treasury chief.
Argentine asset prices went into a tailspin last week after the primary result raised fears of a return to interventionist economic policies. After the markets closed on Wednesday, debt ratings agency Fitch said the peso's recent depreciation "suggests a real risk of default" and "raises the potential for a sharper deterioration in economic growth."
Later in the day, the central bank sold $26 million, then $27 million and then $41 million in three dollar auctions.
Lacunza was scheduled to meet with Fernandez's economic advisers later on Wednesday.
"Since the market pays as much attention to the future as it does to the present, in addition to what the government in charge can do, it also matters what the other candidates and their economic teams say," Lacunza said, when asked about the meeting with the Fernandez team.
In a bid to shore up his flagging support, Macri last week enacted a series of emergency measures, including cuts in food and personal income taxes that are aimed at helping families stung by Argentina's recession and 55% inflation rate.
Nicolas Dujovne, the former treasury minister, quit on Saturday, saying he believed the country needed "significant renewal" of its economic team.
Lacunza said Argentina would hit its target of erasing the country's primary fiscal deficit this year, under a $57 billion standby financing pact signed in 2018 with the International Monetary Fund. Macri negotiated the pact to halt a run on the peso last year.
Macri took office in late 2015, promising to "normalize" the economy after years of heavy-handed currency controls and other interventions in the markets under previous president Cristina Fernandez de Kirchner, who is running as Alberto Fernandez's vice presidential candidate.
But Macri over-estimated his ability to attract the foreign direct investment needed to make the economy grow, while under-estimating the effect that cutting public utility subsidies would have on inflation. His popularity fell as consumer prices, especially home heating gas and electricity bills, shot higher.
Kirchner has been silent since the primary election and Fernandez says he and he alone will determine policy should he be elected. Reviled by business leaders as a free-spending populist who blew out government fiscal accounts during her two terms in office, Kirchner is loved by millions of low-income Argentines who benefited from her generous social programs.
(Reporting by Hugh Bronstein and Hernan Nessi, additional reporting by Jorge Otaola and Walter Bianchi; Editing by Nick Zieminski and Rosalba O'Brien)
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