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Argentina's central bank lowered rate by nearly 2 percentage points

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Argentina's central bank lowered rate by nearly 2 percentage points

Argentina's Banco Central de la República Argentina lowered its benchmark interest rate on Sept. 13 by nearly two percentage points, for the first time since July, to 84.14% from 85.99%, Clarin reported.

The interest rate remains at historically high levels, due to persistently elevated inflation and fears that lowering the rate for peso deposits and peso-linked financial instruments might lead investors to move away from local currency to the U.S. dollar, causing an already weak peso to continue to devalue against the dollar.

On Sept. 13, the benchmark rate, which is determined through a daily auction of central bank notes, dropped by 1.85 percentage points, with the central bank taking in 21.59 billion Argentine pesos, according to the report.

The Argentine government imposed capital controls Sept. 1 that limit the purchase of U.S. currency, and as a result, different currency exchange rates have appeared alongside the official one. A gap has widened between the official exchange rate, which closed at 58.44 pesos to the dollar last week, and the exchange rate used to carry out international asset transactions, which closed at about 73.21 pesos to the dollar.

The latter price, which is the exchange rate used in a type of international asset trading, and is sometimes referred to as a blue-chip swap, picked up pace late last week, over concerns that the International Monetary Fund would delay its disbursement of an estimated $5.4 billion.