Their scheme is certainly trying to unravel, but they seem to live a charmed life: capital flight.
Argentina's central bank chief late Friday downplayed the significance of Argentines' rising interest in buying dollars.
The central banker's comments come after reports that the bank has had to spend increasing amounts of money to prevent the peso from moving substantially away from its current informal peg of about ARS4.085 to the U.S. dollar.
"There's been some confusion about what's been happening in recent days," Central Bank of Argentina President Mercedes Marco del Pont said in a TV interview. "It hasn't been capital flight but rather a change in peoples' [investment] portfolios."
Marco del Pont said there is "no reason to be alarmed" at rising interest in the dollar. She said the monetary authority has "enormous and absolute" power to keep the exchange rate stable.
The public comments about the currency market, which are somewhat rare for the central bank president, come as people are voicing increased concern about the future of Argentina's economic policies ahead of October's presidential election.
Meanwhile, the renewed interest in dollars, which have traditionally provided both a financial and psychological refuge for nervous Argentine investors, is meeting greater resistance from the government.
Argentine President Cristina Fernandez's administration has been making it harder to buy dollars and limiting the amount that people can buy in the formal market. This has increased demand for dollars in the informal, or so-called parallel, market and led to a rising gap between prices in both markets.
The informal rate now hovers around ARS4.43, according to a report Friday by RBS.
"The spread between both markets is now at 8.5%, the highest since 2008, and reflects increasing dollar demand," RBS said.
Anxious Argentines are buying dollars in greater numbers to hedge against a depreciating peso and economic uncertainty ahead of the election.
"We expect private dollar demand to remain strong and in line with this for the exchange rate to continue under weakening pressure," RBS reported.
With monthly dollar demand now estimated at around $2 billion, RBS expects the government to keep intervening in the currency forward market.
"There is still some cushion in the level of international reserves to withstand some intervention before triggering panic outflows, but the status quo will eventually push for an adjustment," RBS said.
Marco del Point said the central bank's reserves total around $52 billion, giving it ample capacity to keep the market stable. But such reassurances may not ease people's minds amid speculation that Fernandez may pursue more radical policies if reelected.
Fernandez hasn't said if she'll run again, but her reluctance to offer details about her policy plans, as well as comments by a top official, have fueled speculation that she would exert greater control over private sector companies in a second term.
Recent comments by Deputy Economy Minister Roberto Feletti increased these fears.
"Populism, which a lot of people criticize, should be radicalized," he said in an interview with Debate magazine.
Feletti's office declined to clarify the meaning of his comments.
-By Taos Turner, Dow Jones Newswires; 5411-4103-6728;
[email protected]
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