- Thomson Reuters
- Argentina has raised interest rates for the second time in 24 hours, to 40%.
- The move represents the third attempt in a week to arrest the fall of the Argentine peso, which is struggling to maintain value against the US dollar.
- The central bank attempted a rate rise to 33.25% on Thursday, which was unable to stop the fall of the currency.
Argentina’s central bank has raised interest rates for the second time in 24 hours, to 40%, in a desperate attempt to save the struggling peso.
The rise comes after previous interest rate hikes and a $5 billion central bank intervention failed to stabilize the declining currency.
The new rate represents the second rise in 24 hours and the third within a week. But the measures have so far not been enough to stop the fall of the peso, a currency struggling to maintain its value against an increasingly strong US dollar.
“As well as using interest rates, the BCRA will continue operating with all its tools for intervention in the foreign exchange markets,” the central bank told the Financial Times on Friday morning.
The Argentine currency has lost around a quarter of its value this year and passed the 22 peso per dollar mark on Thursday, making it the worst performing emerging market currency this year. A strengthening dollar and the possibility of rate rises from the US Federal Reserve have caused Argentina and other emerging markets to struggle.
Argentina and other Latin American countries tend to issue debt in US dollars, so any rise in the greenback can heavily impact the economy.
“There is an inbred paranoia that the currency is going to go haywire at any point in time,” Walter Stoeppelwerth, head of research at Balanz Capital in Buenos Aires, told the FT.