Argentina’s peso surpassed the psychological barrier of 300 pesos per U.S. dollar in the black market on Tuesday, hitting a record low as it traded down 3% from the previous day as both businesses and individuals hold on to scarce greenbacks.
The peso’s latest downward slide comes amid growing doubts over the near-term prospects of the crisis-prone South American economy, following a sudden shake-up earlier this month at the helm of the economy ministry where Silvina Batakis took over from a predecessor perceived as more centrist.
The beleaguered peso currency in the informal market has lost nearly 31% so far this year, in line with 32% inflation during the same period, according to private estimates.
“The (currency) market is distorted. We’re in a moment where everyone is looking to cover themselves at any price. It’s crazy,” said one trader, who spoke on condition of anonymity.
Savers are turning to the black market due to tight currency controls on the official exchange rate amid uncertainty over a potential devaluation, a move the government has repeatedly pledged to avoid.
Government bonds in the local over-the-counter market lost 2% on average, marked by some improvement with bonds that adjust for inflation.
Some analysts see inflation reaching 80% this year as internal tensions rack the governing coalition of President Alberto Fernandez.
The official peso exchange rate weakened 0.19% against the dollar on Tuesday, widening the gap with the parallel rate to slightly above 132%.
“The growing gap shows a greater tension in the foreign exchange market, and generates more pressure for a devaluation of the official exchange rate,” the National University of Avellaneda (UNDAV) said in a statement.