“The Central Bank of Argentina (BCRA) responded by increasing interest rates to 60% (from the already high 45%), and establishing a new ‘encaje’ (increasing the proportion of bank deposits that need to be placed with the BCRA), in order to reduce financial-sector liquidity, but without any major recovery in the peso. The additional measures reflect that prior policy actions have failed to resolve investor distrust,” according to Markit.

Still, investors remain pensive regarding Argentine assets.

“However, according to our sources in Argentina, two fundamental items are still lacking: a solid long-term economic development program, and significant changes to Macri’s economic team,” said Markit. “Following the latest announcement, our sources commented that there was significant business and political expectation that important figures of the government would be rapidly removed to restore confidence, and that the government would reach a deal with moderate opposition Peronists in order to increase governability.”

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