Argentina sells $803m in reserves amid USD demand surge

Argentina’s central bank sold $803 million in hard-currency reserves this week to meet a surge in dollar demand from importers ahead of a major bond payment.

The intervention, which spanned three consecutive business days, was prompted by the auto industry’s need for US dollars to pay overseas suppliers after President Javier Milei eliminated a key import tax. On Thursday, the central bank sold the largest single-day amount of foreign reserves since October 2019, with an additional $25 million sold on Friday.

This depletion of reserves risks undermining efforts to replenish Argentina’s foreign exchange (FX) holdings, crucial for lifting capital controls and stimulating investment. The country also faces upcoming bondholder payments totaling $9 billion in 2024, half due in about 13 days.

Despite Wall Street’s praise for Milei’s reforms, concerns persist over Argentina’s net foreign reserves, which range from negative $10.4 billion to a $4.6 billion deficit. Meanwhile, the peso in the parallel market strengthened by 0.65 per cent to 1,185 per dollar.

Attribution: Bloomberg

Subediting: Y.Yasser