Latin America Currencies: Argentina’s Peso Falls for 15th Day

By Drew Benson and Andrea Jaramillo

Dec. 2 (Bloomberg) -- Argentina’s peso fell for a 15th day, its longest losing streak since the government abandoned a one- to-one peg with the dollar in 2002, as the central bank seeks to smooth out a slide sparked by a tumble in commodity exports.

The peso dropped 0.4 percent to 3.3950 per dollar at 5:16 p.m. in New York, from 3.3825 yesterday. The currency is down 2.9 percent since it began to drop on Nov. 12 and has dropped no more than 0.7 percent in a day over that time. The central bank aims to avoid “sharp fluctuations” in the peso without setting target rates, bank spokesman Fernando Meanos said.

“The central bank is letting the peso devalue in a gradual and controlled manner,” said Daniel Bou Kahir, a currency trader at Buenos Aires-based Banco de la Pampa. The central bank is managing the slide in an effort to avoid further eroding investor confidence in the peso, he said. The extent of the decline “leads us to believe that this plan is here to stay,” he said.

In a bid to further tighten control, Argentina’s securities regulator announced yesterday that investors must use one agent, Caja de Valores SA, for so-called blue chip swaps that allow Argentines to buy securities with pesos in the country and then sell them abroad for dollars.

Commodities such as soybeans and wheat account for more than half of Argentina’s exports. Commodities have slumped 49 percent since July 2 as the global financial crisis has throttled economic growth, according to the UBS Bloomberg Constant Maturity Commodity Index of 26 raw materials.

‘Gradual Recovery’

The yield on the country’s inflation-linked peso bonds due in December 2033 fell 75 basis points, or 0.75 percentage point, to 20.06 percent, according to Citigroup Inc.’s local unit.

Latin American currencies will outperform other developing- nation currencies in 2009 as “economic fundamentals” in countries such as Brazil and Chile remain strong, Merrill Lynch & Co. currency strategists led by Daniel Tenengauzer said in a research note today.

Chile’s peso will post a “gradual recovery” next year, ending at 580 per dollar, while Colombia’s peso will underperform other Latin American currencies and the Argentine peso will weaken, according to the report.

The Chilean currency dropped 0.7 percent to 670.77 per U.S. dollar, from 666.05 yesterday. The peso has plunged 26 percent this year.

The yield for a basket of five-year peso bonds in inflation-linked currency units, known as unidades de fomento, fell four basis points to 3.47 percent, according to Bloomberg composite prices.

Colombia, Peru

Colombia’s peso declined 0.2 percent to 2,320.1 per dollar from 2,316 yesterday. The yield on the nation’s benchmark 11 percent bonds due in July 2020 fell the most in more than a week, dropping 19 basis points to 12.13 percent, according to Colombia’s stock exchange.

In Peru, the sol fell 0.3 percent to 3.113 per dollar, from 3.1040 yesterday. The yield on Peru’s 8.6 percent sol- denominated bond due in August 2017 fell 15 basis points to 7.85 percent, according to the local unit of Citigroup Inc.

Venezuela’s bolivar was little changed at 5.1 per dollar in the unregulated market, traders said. Venezuela pegs the currency at an official exchange rate of 2.15 per dollar under restrictions imposed in 2003. People turn to the unregulated market when they can’t get dollars at the official rate.

To contact the reporters on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net; Andrea Jaramillo in Bogota at ajaramillo1@bloomberg.net.