Argentine peso firms on central bank moves, Latin American stocks fall

Luis Caputo’s recent actions have boosted the value of the Argentine peso. (Reuters pic)

BRASÍLIA: Argentina’s peso firmed sharply as a new central bank governor took his first moves to shore up the battered currency, while escalating fears of a damaging trade war between the United States and China drove Latin American stocks down.

The Argentine peso jumped after the central bank said it will hike banks’ reserve requirements in a move expected to tighten local-currency liquidity after the latest run on the peso.

It was the first in a series of measures announced under new Governor Luis Caputo, who replaced Federico Sturzenegger last week as the peso sank to record lows.

Argentina’s benchmark stock index tumbled on Monday by more than 8% in it its biggest one-day percentage loss in three-and-a-half years.

Traders said stocks were pressured by speculation that index provider MSCI would not upgrade Argentina to its emerging markets category later this week, as many have hoped.

Stocks markets also fell throughout Latin America on worries about trade friction between the world’s two leading economies.

The United States on Friday detailed US$50 billion (RM200 billion) of Chinese imports to face 25% tariffs. The move prompted a swift response from Beijing, which said it would sanction US$50 billion (RM200 billion) of US imports and suspend all previous trade agreements with the Trump administration.

Brazil’s main stock gauge lost 1.3% to close at its lowest since last August as state-controlled oil company
Petróleo Brasileiro SA and lender Itaú Unibanco Holding SA fell sharply.

“After the confirmation of the US protectionist attack, risk aversion is exerting substantial pressure over markets,” analysts at Nova Futura brokerage wrote in a client note.

Brazil’s real dipped, but Mexico’s peso firmed more than 0.5% as it crept back from its weakest levels since January 2017 seen on Friday.

Mexico’s central bank is expected to raise its benchmark interest rate on Thursday to a more than nine-year high of 7.75% to counter the peso’s slump.