Source: FT.com
By: Benedict Mander
05.26.2016
Flows of “hot money” into Argentina are worrying policymakers in a clear sign of the dramatic turnround in sentiment since a new centre-right government took power in December.
Although dollar shortages were one of Argentina’s most urgent problems just six months ago, foreign investors emboldened by recent market-friendly reforms were this week banned by the central bank from buying its local currency notes amid fears that the peso’s strength is harming competitiveness.
Faced with the challenge of extinguishing inflation running at more than 30 per cent, the central bank jacked up local interest rates to 38 per cent earlier this year. That stimulated a sharp surge of dollar inflows that have helped to strengthen the peso at a time when most other emerging market currencies are weakening.
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