Argentina's peso continued to weaken against the U.S. dollar Tuesday as the government seeks to ease pressure on exporters who say the currency is becoming less competitive amid rampant domestic inflation.
The peso weakened to ARS4.1945 to the dollar on the MAE local foreign-exchange wholesale market, compared with ARS4.188 previously.
"Demand [for dollars] was higher than usual in the market," said Sebastian Centurion, a currency trader at ABC Mercado de Cambios. "The peso has been depreciating at the rate of around 1% a month but so far this month it's depreciated by about 1.2%. It may be that the government is trying to compensate for previous months in which the currency didn't depreciate that much."
Centurion said the government is trying to keep Argentine companies and their products competitive, but that it's hard to know if it will let the peso hasten its decline.
Even so, Centurion said it seems reasonable to expect it to depreciate by another 10% or 11% next year, putting it at around ARS4.50 or so.
Argentine President Cristina Kirchner has yet to publish the details of her 2012 budget proposal. The 2011 budget bill, which was never approved by Congress, forecast an average exchange rate of ARS4.10 for 2011. It called for an average of ARS4.26 for 2012.
Volume in the forex market totaled $636 million.
Many economists have said that annual inflation, which they say surpasses 20%, is increasing the value of the peso in real terms, making local products less competitive. In part because of that, they expect the government to let the peso slide at an even faster rate next year. Government officials have declined to say how the rate management policy might change in 2012.
Stocks rose in late afternoon trading, following similar late-round gains on Wall Street.
The Merval rose 0.56% to 2,960 points in low-volume totaling around ARS32 million ($7.6 million).
The holding company Sociedad Comercial del Plata (COME.BA) led the gains by rising about 5% to ARS0.78. It was followed by the oil and gas company YPF (YPF.BA, YPFD), which rose almost 2.4% to ARS174.
The industrial manufacturer Mirgor (MIRG.BA) led the declines, falling 1.4% to ARS103.50.
The Global X FTSE Argentina 20 ETF, which tracks shares of Argentine companies listed on international markets, rose 0.24% to $12.63 in New York.
The benchmark peso-denominated 2033 bond rose almost 1% to ARS157.50, yielding around 9.9%.
