Argentine peso rises on capital controls; trade woes impede Latam stocks
By Agamoni Ghosh
Sept 3 (Reuters) - Argentina's peso gained for a second day on Tuesday following capital controls amid a deepening financial crisis, while ongoing U.S.-China trade tensions dented Latin American stocks.
The peso ARS= opened sharply stronger, up 6% officially against the dollar, marking Wall Street's first reaction to Argentina's new currency controls after a long holiday weekend in the United States.
A divergence between the official and black market rates of the currency still remained for a second day, casting doubts on how long the recovery in the peso could be sustained through such controls.
"The black market rate is lower then the official suggesting that there is still some pressures there," said Edward Glossop, Latam economist at Capital Economics.
"History suggests that capital controls do sometimes help to alleviate pressure on currencies in the near term, but over the longer term when people start finding loopholes in the system. That's when it makes it more difficult."
The controls come after markets reacted sharply to rating downgrades by Standard and Poor, Fitch and Moody's, after the government announced its plans to "re-profile" some $100 billion in debt.
MSCI's index of Latin American stocks .MILA00000PUS was 0.2% lower, in-line with global equities as investors fret about Washington and China's struggle to schedule a meeting this month to renew trade talks. MKTS/GLOB
The Merval stock index in Buenos Aires .MERV shed 3.7%after having closed 6% higher in the previous session.
Stocks in Chile .SPISPA declined 0.7%, while the peso CLP= fell to its lowest since January 2016 ahead of a decision by the central bank's on monetary policy.
"We think that the central bank will lower the monetary policy rate by 50bps, to 2.00%, in today's monetary policy," said analysts from Credit Suisse in a note.
Key Latin American stock indexes and currencies at 1430 GMT
daily % change
MSCI Emerging Markets .MSCIEF
MSCI LatAm .MILA00000PUS
Brazil Bovespa .BVSP
Mexico IPC .MXX
Chile IPSA .SPIPSA
Argentina MerVal .MERV
Colombia IGBC .IGBC
daily % change
Brazil real BRBY
Mexico peso MXN=D2
Chile peso CLP=CL
Colombia peso COP=
Peru sol PEN=PE
Argentina peso (interbank) ARS=RASL
(Reporting by Agamoni Ghosh amd Medha Singh in Bengaluru)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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