BUENOS AIRES: Argentina's peso slipped on Tuesday, a day after the central bank's new governor reassured the public that its approach to taming the country's rocky economy would be sustainable over the medium term.
The peso closed 0.46 percent weaker at 36.65 per US dollar. The currency has fallen 0.30 percent against the dollar this week, although it has climbed 12.63 percent since the beginning of the month.
The peso has lost around half its value against the dollar so far this year, contributing to inflation in Latin America's third-largest economy.
Tuesday's move lower came after Argentina's central bank governor Guido Sandleris, who was appointed last month, re-hashed the bank's monetary policy in front of reporters on Monday evening.
Sandleris spoke with measured optimism about the bank's strategy of keeping pesos out of the foreign exchange market by offering daily auctions of high-interest peso-denominated debt, known as "Leliq," to banks.
The central bank sold 110.929 billion pesos (about $3 billion) worth of the seven-day notes on Tuesday with an average annual interest rate of 71.392 percent, traders said.
Sandleris, has made control of the money supply the bank's major priority in an effort to rein in inflation, which is expected to top 44 percent by year-end, according to the latest central bank poll.
Banks have benefited from the high-interest Leliq interest rates, Sandleris said.
"That was one of our objectives; that saving in pesos would again be attractive and would take some pressure off the exchange market," he said.
But that optimism should be guarded, analysts say.
"The challenges imposed by harsh monetary and fiscal policies, added to Argentina's increasing political and social noise are not contributing to a scenario of greater confidence, Gustavo Ber, an economist with local consultancy Studio Ber said. "Especially in the run-up to next year's presidential elections."
Argentina's economy has suffered from repeated crises of confidence in 2018. After the worst drought in 60 years withered grain exports, a run on the peso halved the currency's value against the dollar, prompting the South American country to enter a $57 billion standby financing agreement with the International Monetary Fund.
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