BUENOS AIRES – The Argentine peso plunged 42 percent against the dollar on Thursday following the decision of new President Mauricio Macri to end currency controls.
The cost of dollars from state-run Banco Nacion climbed from the previous day’s 9.83 pesos per greenback to 13.95 pesos, a devaluation of 41.9 percent.
The rate at private banks and currency exchanges in Buenos Aires was roughly 14 pesos to the dollar.
The peso edged up Thursday on the parallel illegal market that developed as a result of the controls, reaching 14.48 to the dollar, a difference of only 3 percent from the bank rate.
On Wednesday, the gap between the official and black-market rates was closer to 48 percent.
Finance Minister Alfonso Prat-Gay announced the end of the currency restrictions late Wednesday, after the markets closed, which gave operators less than 24 hours to prepare for the new trading environment.
“Today is still not a normal day because the market is not working fluidly, but it will normalize in the coming days,” economist Martin Redrado, a former Central Bank chief, said on Thursday.
While describing the end of controls as positive, Redrado said officials will have to closely monitor the effect of the devaluation on consumer prices at a moment when inflation is running at nearly 25 percent.
The head of Argentina’s CGT labor federation, Hugo Moyano, said Thursday that his organization will not allow the end of currency restrictions to diminish workers’ purchasing power.
Gabriel Torres, a vice president of rating agency Moody’s, said the elimination of foreign exchange controls “will probably reduce distortions of the market.”
“This should make exports more competitive and attract more foreign investment to Argentina,” Torres said.