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Financial News: ARGENTINA: New BCRA Governor Announces Moves To Curb

ARGENTINA: New BCRA Governor Announces Moves To Curb USD Rise

06/18/2018 - 14:46:00 (RTTNews)

(RTTNews) - Argentina's Central Bank (BCRA) announced a set of measures to "improve the functioning of the market" and curb the locally traded U.S. dollar appreciation against the Argentinean peso. This is the first action of Luis Caputo as the new governor of the BCRA. Last week, the Argentinean peso fell to 28 per USD, leading Federico Sturzenegger to resign as central bank's governor.

As a first step, the BCRA decided that "bank reserves should be gradually increased by 5 percentage points for demand and term deposits, with certain exceptions." The bank estimated that the move should bring about an absorption of liquidity of around 100 billion pesos, "taking into account that each minimum cash requirement point in pesos represents around 20 billion."

The increase in demand should take place on June 21, initially with 3 percentage points, and on July 18, with an additional 2 percentage points.

"It will be possible to integrate this total increase in minimum cash in pesos or through National Treasury Bonds in pesos at a fixed rate due in November 2020," the BCRA added.

The second move refers to the reduction of the limit of the net positive global position of foreign currency computed in daily balances from 10% to 5% of the computable patrimonial responsibility of the financial entities.

In addition, "with the aim of giving dynamism to the secondary market of National Treasury Bills in Foreign Currency (Letes in U.S. dollars)," according to the financial entity, the requirements for financial entities to acquire Letes in U.S. dollars in the secondary market are relaxed.

Entities are authorized to increase their net global position in foreign currency to between 5% and 30% of their computable patrimonial responsibility, while the excess is integrated with Letes in U.S. dollars.

Finally, a new mechanism was added to carry out operations of foreign currency in cash. The move is already in effect, and tomorrow the total amount of the tender should be up to US$ 400 million.

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