Argentina’s struggling currency hit a record low against the dollar on Thursday, weakening over 4% to close at 42.5 pesos per dollar, a challenge for President Mauricio Macri as he looks to right the economy ahead of elections in October.
The peso, which had strengthened at the start of the year, has lost over 11% in 2019, renewing fears after a sharp sell-off in 2018 saw the Argentine currency lose around half its value against the greenback.
The currency remains, however, within the limits of a non-intervention trading band agreed with the International Monetary Fund (IMF) as part of a US$ 56.3 billion deal last year. The upper limit of that band was 50.199 pesos per dollar on Thursday.
The record low stands in marked contrast to January and February when the central bank spent just shy of a billion dollars trying to weaken the peso when it strengthened outside the limit of the band.
“This is a really ugly signal (for the market),” said Federico Furiase, a Buenos Aires-based economist at consultancy Eco Go.
Argentina’s economy is shrinking and the country has one of the highest inflation rates in the world. On Wednesday, a central bank poll of economists increased their 2019 inflation forecast to 31.9%.
Analysts also see the peso weakening further to around 48 pesos per dollar by the end of the year, Goldman Sachs said in a note on Wednesday, with uncertainties about the presidential election likely to drag the currency down.
Other Latin American currencies also fell on Thursday against a stronger dollar, which hit a near three-week peak against some currencies.