Argentina devalues peso after shock primary election result

Argentine monetary authorities on Monday devalued the peso by around 20 percent in anticipation of a market backlash to the strong performance of far-right politician Javier Milei in a presidential primary election.

The Banco Nacion state bank showed the peso trading at 365.50 to the dollar, up from 298.50 on Friday.

The libertarian Milei, a political outsider who has proposed dollarizing the country's battered economy, performed much better than expected in Sunday's vote, in what local media referred to as a "political tsunami."

In a unique format, Argentines voted for their favorite among 22 potential candidates, allowing parties to pick their frontrunner while providing a key popularity test ahead of the October election.

Milei scored 30 percent of votes, ahead of the right-wing opposition candidate Patricia Bullrich who scored 28 percent, and the ruling center-left coalition's candidate Economy Minister Sergio Massa, who came third with 27 percent.

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The Latin American giant is gripped by deep economic malaise, with annual inflation at 115 percent, and poverty at 40 percent.

The devaluation of the so-called official dollar rate is the largest in a single day since December 2015.

The informal market's "blue dollar" -- the most accessible to residents and businesses amid strict currency controls -- was trading at about 680 pesos.

Argentina's Central Bank on Monday also announced a steep increase in its benchmark lending rate -- from 97 percent to 118 percent -- in its third big hike in five months.

The bank said the move would help cushion "exchange rate expectations, and minimize the repercussion on prices."

Dollar bonds and Argentine shares on Wall Street fell around 10 percent.

Source: AFP