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Argentina's international reserves fell more than $7.40B since primaries

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Argentina's international reserves fell more than $7.40B since primaries

Argentina's international reserves have fallen by $7.40 billion since the primary presidential elections on Aug. 11, El Cronista reported, as Banco Central de la República Argentina has stepped up its interventionary stance to contain the country's deteriorating currency.

Higher debt payments have been made due to dropping bond prices and difficulties in the refinancing of Letes treasury bills have also contributed to Argentina's reserves decreasing to $58.89 billion as of Aug. 21, according to the publication. Analysts described the trend as "unsustainable in the long-term" and noted that with less uncertainty after the October elections, Argentina is likely return to a more prudent spending of its reserves.

Argentine assets plummeted since the primary elections, where Peronist opposition candidate Alberto Fernández emerged as the frontrunner in the presidential race, after defeating incumbent Mauricio Macri by a wider-than-expected margin. With investment sentiment shaken, and financial and securities markets taking a hit, the government only managed to renew Letes notes worth $950 million for $409 million.

The reserves were further hit on Aug. 20 when Argentina's Treasury paid about $2.62 billion to cancel repo loans it had obtained from international private-sector banks. The government decided to act following a sharp fall in the value of Argentine sovereign bonds that functioned as a guarantee on the loans. On that single day Argentina's reserves fell by $3.01 billion, according to El Cronista.

Argentine central bank chief Guido Sandleris warned that August and September will bring increased inflationary pressure in the wake of recent volatility and efforts to contain its impact on currency depreciation. The Argentine peso fell around 24% last week, settling at a "competitive" rate, according to Sandleris.

The Argentine banks have hiked their lending rates for companies to reflect a sharp rise in the central bank's reference Leliq rate to around 75% since the primary elections, the publication reported separately. For example, state-run Banco de la Nación Argentina is now offering nominal yearly rates at 69%, up from 59% before the primaries. However, measured at the effective annual rate, the rates have risen to 96% from around 78% before Aug. 11, the publication noted.