Argentina hikes benchmark interest rate to 118% to defend devalued currency

Argentina hikes interest rate to 118% on devalued currency

Argentina devalued its currency by nearly 18% on Monday while the benchmark interest rate was raised by 21 percentage points to 118%, the country’s central bank said, as financial markets reeled the day after a shock primary election result.

Congressman Javier Milei, a far-right libertarian who wants to axe the central bank and dollarize the economy, shook up the presidential elections on Sunday, winning 30% of the vote, the largest share with over 97% of ballots counted.

“We think Argentine USD sovereign bonds present an attractive risk-reward profile, given their depressed valuations, positive correlation to commodity prices, and the potential political regime change,” said Alejo Czerwonko, CIO for Emerging Markets Americas at UBS Global Wealth Management as reported by Reuters.

Argentinian stocks and its sovereign dollar bonds were also lower Monday.

The central bank said Monday that the peso would be held at 350 to the dollar until the October vote – CNBC Africa reported

Milei, riding on a wave of popular discontent, has vowed to get rid of the central bank and dollarize Argentina’s economy. He has also advocated for sharp spending cuts.

Argentina, Latin America’s third-largest economy, has faced an economic crisis for years. The country’s foreign reserves are shrinking fast and its inflation is forecast at 142.4% for the year.

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