Argentina’s central bank ramped up interest rates by 15 percentage points on Thursday in a bid to slow the fall of its plunging peso, part of a sell-off among emerging market currencies.
The Turkish lira and the South African rand also fell against the dollar on Thursday. But it was the Argentine peso that experienced the sharpest drops, driven by fears the country would not be able to make its debt payments.
The move by Argentina’s central bank, which brings its benchmark lending rate to 60 percent, came a day after the country’s president, Mauricio Macri, said he had asked the International Monetary Fund to release $50 billion in credit earlier than had been agreed.
The central bank said its monetary policy committee had made the unanimous decision to address the plummeting value of the Argentine peso, and to counter fears that the currency’s decline could drive faster inflation. The currency has lost nearly half its value against the dollar since the start of the year — one dollar had bought 18.8 pesos, and now purchases 35.9 pesos — and fell as much as 15 percent on Thursday.
Referring to the peso’s decline, Deutsche Bank analysts told clients Thursday morning, in a note issued before the central bank’s decision: “The immediate catalyst was President Macri’s request for the I.M.F. to speed up disbursements under its current bailout program.” They added: “It is now unclear if that will be enough to stabilize the government’s finances.”
The analysts said that moves by the Turkish central bank, in particular, to tighten monetary policy — but not go so far as to raise interest rates — “failed to inspire confidence.”
Turkey’s lira has dropped significantly this year, falling to record lows against the dollar at one point as investors worried about accelerating inflation and a lack of confidence in the economic leadership of President Recep Tayyip Erdogan. On Thursday, it fell around 5.5 percent, its fourth consecutive day of declines.