May 11, 2018 / 9:14 PM / 7 months ago

EMERGING MARKETS-Argentina peso hits record low; central bank intervenes

(Updates prices)

SAO PAULO/BUENOS AIRES, May 11 (Reuters) - Argentina’s peso tumbled to a record low against the dollar on Friday, prompting the central bank to intervene in the spot market for a second straight day, as talks for an International Monetary Fund financing line failed to calm traders.

Argentina’s central bank sold about $1 billion in the foreign exchange market on Friday, traders said, as the peso weakened 2.74 percent to an all-time closing low of 23.35 per U.S. dollar. For the week, the peso weakened 6.30 percent, and for the first 11 days of May it weakened 12.03 percent.

On Thursday, IMF Director Christine Lagarde said she instructed her team to continue discussions toward a fund-supported program for Argentina.

The Argentine government has hiked the benchmark interest rate some 1,275 basis points in recent weeks and announced it would seek a so-called “high access stand-by” agreement from the IMF to stabilize the country’s economy.

Investors “are continuing to unwind their positions (in peso-denominated assets) to dollarize (their portfolios),” said a Buenos Aires-based trader. “The central bank had to sell dollars once again, but they were absorbed by the market immediately and the exchange rate didn’t fall.”

Across Latin America, some other major markets also saw their currencies weaken.

In Brazil, the real currency was trading down 1.53 percent against the dollar. Traders said they were adopting defensive positions ahead of a new presidential election opinion poll.

“Markets are hoping for a candidate with a reformist vision rising in the polls, which hasn’t happened yet,” wrote brokerage Advanced Corretora in a report.

In Mexico, the peso fell 1.07 percent after Mexican Economy Minister Ildefonso Guajardo said the nation would not be rushed into a poor North American Free Trade Agreement deal and that plenty of issues with the negotiations were outstanding. (Reporting by Gram Slattery in Sao Paulo and Walter Bianchi in Buenos Aires; Editing by David Gregorio and Rosalba O’Brien)

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