Investors Turn To Yen, Gold As Argentina Economy Seen To Crash

Argentina’s Massive Sell Off Had a 0.006% Chance of HappeningMore

The political turmoil, the burden of unpopular economic measures, and the uncertainty of a possible future populist government caused the dramatic slump in the markets with the Argentine stock market falling 35% and the currency dropping 25% of its value against the USA dollar after a surprise primary election result.

The Argentine peso took a roller coaster ride Tuesday, opening higher and then falling a day after sustaining a huge loss in the wake of pro-business President Mauricio Macri's crushing defeat in party primaries.

The primary results showed Fernandez, a former Cabinet chief, was well placed to win October's general election in the first round.

Yen and bond bulls charged on Monday while stocks struggled again, amid ongoing worries that a prolonged U.S.

Expectations that rates will be cut by 25 basis points rose to 95.0% from 84.6% a day prior as fewer traders bet on a more dramatic 50-basis-point cut next month.

Fernandez has vowed to renegotiate the terms of a $57 billion loan the country received from the International Monetary Fund in 2018 meant to help the heavily-indebted country to service future borrowing.

The victory by Alberto Fernandez ― whose running mate is former Argentine President Cristina Fernandez de Kirchner ― "paves the way for the return to left-wing populism that many investors fear", consultancy Capital Economics told clients.


With more than 98 percent of the votes counted, the coalition backing Macri's rival Alberto Fernandez secured 47.65 percent of the vote, while the alliance of the incumbent president has 32.08 percent.

The Argentine peso was less volatile, trading in a tighter range, down 6.04% at 55.30 to the dollar.

Investors are now fleeing the country's assets in hoards, leading industry watchers to question if default is on the horizon.

There are another US$18.6 billion in bond principal, loans and interest payments issued in pesos. The 15-point lead was much larger than investors had expected, Bloomberg reported.

US Treasury yields dropped across the board as trade worries and political tensions around the world in places such as Hong Kong and Argentina supported safe-haven assets. It was also punctuated by another default that made the country an worldwide pariah for years. "Although you would not expect that to happen during 2019", an Argentinian broker said. Goldman Sachs became the latest to cut its U.S. growth forecast at the weekend, warning that a U.S. China trade deal now looked unlikely before the 2020 U.S. presidential election. If Macri loses, Fernandez may attempt to renegotiate Argentina's debts with the International Monetary Fund.

In a press conference Monday, Macri said he still has a shot to reverse the trend in October and that his economic team is working on measures to address voter concerns on the economy.

"The Bitcoin/ArgentinePeso market is highly illiquid", said Kruger.

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