Argentine Currency Crashes To Record Low After Debt-Restructuring Plan

As we detailed last night, Argentina’s embattled government will ask its creditors including the IMF for more time to pay off $101bn of debts, as the country struggles to avoid a ninth sovereign default.

Hernán Lacunza, the finance minister, late on Wednesday, said confidently

"The government is aiming to clear the outlook for the financial programme in the short, medium and long-term horizon,”

“This is due to short-term liquidity stresses and not due to problems with the solvency of the debt.”

But the currency markets suggest investors are selling first and asking questions later... The Peso just plunged above 60 per USD, a new record low...

Source: Bloomberg

And JPMorgan agrees, warning that pressure on Argentina’s international reserves may linger amid foreign-exchange deposits withdrawals and dollarization of peso deposits despite the government’s plans to extend debt maturities.

“A political gesture of the main opposition candidate and favorite to win the elections is a necessary condition to break the prevailing vicious cycle that has taken a toll on reserves,” analysts Diego Pereira and Lucila Barbeito write in a note.

By announcing the debt re-profiling late Wednesday, government aims to address short-term liquidity problems with the clear intention of safeguarding reserves, they write.

JPMorgan says the reaction of local law debt holders “is not clear,” particularly if the Congress addresses the local debt re-profiling bill only after the October election.

However, for now, judging by the collapse in the peso, traders are taking the "Fool me once, shame on you, Fool me a ninth time, shame on me!" road...