BUENOSAIRES (Reuters) – Argentina’s bonds dipped on Friday while the trading price of the peso in the black market veered further away from the official spot rate after the government rolled out additional currency controls earlier this week.
The country’s over-the-counter bonds dipped 2.5% while currency trades in the unofficial parallel market saw the peso dip more than 2.44% to 61.5 per U.S. dollar. That took it to almost 10% away from the official rate of 56.15 per greenback.
That was also a hair-breadth away from being the widest gap since late 2015, which was recorded last week.
The black market dollar trade in Argentina has reignited since a shock primary election defeat for President Mauricio Macri in August sparked a market sell-off and prompted the government to roll out capital controls to protect the peso.
The central bank rolled out further measures this week to close loopholes that were allowing traders to circumvent restrictions on dollar purchases.
GRAPHIC: Black market peso – https://fingfx.thomsonreuters.com/gfx/editorcharts/ARGENTINA-CURRENCY-BLACKMARKET/0H001QETH86G/eikon.png
“The latest measures seeking to limit exchange rate arbitrations created a negative reaction, not only in asset prices but also widening again the gaps” between the spot and unofficial rate, said Gustavo Ber, economist at Estudio Ber.
“That’s down to the fact that currency exchange controls are being reinforced.”
The gap between the two prices indicates that traders think the official rate is over-valued or that there are limits on how many dollars can be bought or sold through formal channels, creating demand for illicit trades.
Under Macri, who came to power in 2015 pledging to abolish capital controls, the gap has been minimal and the volume has declined. However, there was often a wide gap between the two prices during currency controls under his predecessor Cristina Fernandez de Kirchner.
Fernandez de Kirchner, who ran the country between 2007 and 2015, is running for vice president on the main opposition ticket to Macri, which is widely expected to win the general election in October.
GRAPHIC: Diverging prices – https://fingfx.thomsonreuters.com/gfx/editorcharts/ARGENTINA-ECONOMY-PESO-BLACKMARKET/0H001QETJ86K/eikon.png
(Reporting by Adam Jourdan, Walter Bianchi and Jorge Otaola; Editing by Alistair Bell)