Argentina's central bank said it sold $551 million in reserves into the foreign exchange market on Wednesday in a bid to stop a slide in the peso currency, which hit a record low due to inflation concerns and poor emerging markets sentiment globally. The peso fell as much as 2 percent to touch its record low of 30.50 per US dollar, as continued jitters about Turkey's lira currency sparked a selloff in emerging market assets. It later rebounded with the central bank auctions, which sold reserves at average prices of 30.03 and 29.81 per dollar.
Argentina has been one of the economies hardest-hit by growing risk aversion among global investors, due to high inflation that hit 29.5 percent in June and a large portion of debt denominated in dollars. Earlier this year, it turned to the International Monetary Fund (IMF) for a $50 billion credit line.
The latest bout of emerging market turbulence prompted the central bank on Monday to hike its benchmark interest rate to 45 percent from 40 percent, and announce a plan to speed up the reduction of the outstanding stock of short-term debt known as Lebacs.
That plan was welcomed by the IMF, but traders said the plan to reduce Lebacs would leave more pesos in the economy, pressuring the exchange rate and inflation. The monetary authority lowered the interest rate on short-term debt to 45.04 percent from 46.5 percent in a Tuesday auction, selling 201.7 billion pesos ($6.75 billion). The peso was trading at 30.12 per dollar as of 1:28 p.m. local time (16:28 GMT).
The official Indec statistics agency was expected to publish July inflation data later on Wednesday afternoon.
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