By Susan Mathew
Oct 2 (Reuters) – Argentina’s peso dropped on Friday after the central bank said it would allow a managed float of the currency, while most other Latin American units fell as global sentiment took a hit after U.S. President Donald Trump tested positive for the novel coronavirus.
The Argentine peso ARS=RASL led losses with the bank saying it would abandon its current “uniform daily devaluations and introduce greater volatility” as the gap between the official exchange rate and the rate quoted in informal currency markets widened close to 93%.
The bank said it would offer trades at 76.95 pesos per dollar at Friday’s open, around 0.91% weaker than the close on Thursday. It also increased the important overnight repo rate to 24%, from the current 19%.
“Even if the number of measures announced is not low, we do not expect them to change the current dynamics. The measures are likely to be seen as insufficient and hence run the risk of being counterproductive,” Citigroup Latam FX strategists said a note.
The safe-haven dollar gained traction after Trump and wife, Melania, contracted the disease just four weeks before U.S. elections. FRX/
Brazil’s real BRBY, was flat with data showing industrial output rose, slightly less than expected, continuing a pick-up after shuddering to a standstill during coronavirus-linked lockdowns.
A Reuters poll showed that Latam currencies are set to remain weighed down this quarter by fears about Brazil’s public finances and Mexico’s close link to U.S. politics.
The real was on track for its fourth straight week of losses, down about 1.7%.
Mexico’s peso MXN= continued its recent trend of outperforming regional peers, up 0.7%, all set to post its biggest weekly rise in more than four months.
Currencies of Colombia COP= and Chile CLP= declined 0.7% and