Argentina’s government put tight controls on the purchase of United States dollars by Argentinian residents. Argentina has a thriving formal and informal (underground) Peso Dollar market. Argentina’s informal foreign exchange trading ground was on a stand still after traders resisted government pressure to sell dollars at cheaper rates and close a widening gap with the formal market.
Over the past two weeks the Argentine peso has weakened faster in the informal market than in formal trade as dollar-hungry savers seek to buy greenbacks despite tough new government foreign exchange controls.
After several sessions of losses in informal trade the peso firmed 4.1 percent on Monday to 4.77/4.79 per U.S. dollar as traders reported behind-the-scenes arm-twisting by government officials.
The new controls which were implemented end of October mean that the central bank will allow transactions over $250,000 only when the person can show that those funds were legally earned, declared when brought in the county, or come from previously-owned assets. Individuals will be able to purchase up to US$2million per month, provided they can prove the origin of the money.
New CFDs Now Available for SuperForex ClientsGo to article >>
The vice president-elect explained that the measures were simply a means of clamping down on tax evasion and money laundering. Under the new system, AFIP, the Central Bank and money laundering operation experts all have access to the same data, making it easier to detect when someone is moving more cash than can be justified by their declared income.
Argentina has been suffering from high inflation and low unemployment, in a recent BIS survey trading in dollar terms was around in Argentina was around $1.1 billion per day.
The FX derivatives market is constantly under the radar as regulators do not favor fund transfer to FX brokers and banks refuse their clients from sending money abroad.