The widening gap between Argentina's official and offshore exchange rates is another sign that markets have lost faith in President Mauricio Macri. Future reformers may receive more investor skepticism, writes Three_Guineas.
The gap between Argentina’s official peso rate and a frequently cited offshore rate from the non-deliverable forward market reached 15% by Sept. 24. Investors and companies use non-deliverable forwards – which are settled in currencies other than the peso – to hedge currency risk.
The parallel exchange rates are the result of capital controls implemented by President Mauricio Macri in early September. The controls were intended to stabilize financial markets and halt the draining of the country’s foreign currency reserves. Macri took office in 2015. In August, he was beaten in a primary election by a Peronist ticket featuring former President Cristina Fernandez. A general election is due for Oct. 27.
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