Argentina's financial "tsunami" erupts, sensitive moment exchange rate | Argentina | Moment
According to Agence France Presse, on August 14th, the Argentine peso depreciated by about 20%, marking the first wave of shock after the presidential primary. In the primary election, extreme liberal "anti system" candidate Javier Milley achieved a breakthrough.
Mile's campaign promise was to "blow up" the Argentine central bank and dollarize the Argentine economy, as well as proposing significant cuts in taxes and public spending.
According to reports, the official peso exchange rate announced by the country's largest state-owned bank, the National Bank, on the 14th was 365.50 pesos to 1 US dollar, while the exchange rate on the 11th was 298.50 pesos to 1 US dollar. In the month since mid July, the peso has depreciated by 38%.
Subsequently, the Argentine central bank announced an increase in the fixed deposit interest rate from 97% to 118%, marking the third significant rate hike in five months, "to coincide with the official exchange rate adjustment," and to suppress "exchange rate expectations and minimize the impact on prices.".
This Latin American third-largest economy is struggling to cope with inflation, which has remained in double digits for 12 years, with an annualized inflation rate of 115%. Since the beginning of 2023, the inflation rate has exceeded 50%.
According to a report by Effe, the unexpected outcome of Argentina's primary election triggered a financial tsunami on the 14th, with both official and parallel exchange rates skyrocketing, Argentine sovereign bonds plummeting, and investors facing increasing uncertainty.
On August 14th, a woman walked on the streets of Buenos Aires.
![Argentina's financial "tsunami" erupts, sensitive moment exchange rate | Argentina | Moment](https://a5qu.com/upload/images/12b5e15c2f2d97ee2c6c11c53248d1ae.jpg)
According to reports, the results of the primary election on the 13th laid the groundwork for the October Argentine general election, with each of the three candidates receiving about one-third of the support of voters.
Experts believe that a tripartite situation will only bring more economic uncertainty, coupled with short-term drastic fluctuations, and ultimately evolve into a complex situation.
The report points out that in addition to the election results, the depreciation of the official exchange rate is also foreseeable, as the country's net foreign exchange reserves are negative. Faced with strong demand for the US dollar, central banks will be unable to maintain exchange rates.
After the announcement of the preliminary election results, the stock prices of Argentine companies listed in New York plummeted by 10%, and Argentine sovereign bonds closed lower.
Experts believe that Millet's unexpected victory has shaken the market, and the market holds a negative attitude towards political radicalization.