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Argentine peso sinks again despite IMF talks

Argentina's currency remained under pressure even after the government opened talks with the International Monetary Fund over a credit lifeline, as investors worried about short-term local debt coming due soon.

Treasury Minister Nicolas Dujovne and IMF Managing Director Christine Lagarde met in Washington, D.C., on May 10 to discuss the country's ongoing financial crisis.

"I stressed my strong support for Argentina's reforms to date, and expressed the Fund's readiness to continue to assist the government," Lagarde said in a statement. She added that the parties would work toward a "rapid conclusion" of a framework for an IMF-supported program.

Despite the meeting, the Argentine peso was down 6.21% against the dollar in early trading May 11, though later regained some ground and was down 2.05% by 2:10 p.m. ET.

The reaction of Argentine citizens may be the biggest problem for President Mauricio Macri. Many in the country blame the IMF and other global finance organizations for the political and economic upheaval that took place after the country's 2001 currency devaluation and debt default — at that time, the biggest default in history.

The peso also weakened even though the central bank raised interest rates by 12.75 percentage points.

"The main weight on the peso does not appear to be coming from foreign investors as much as domestic investors trying to dollarize their savings," analysts at Brown Brothers Harriman said in a note to clients.

About $30 billion of short-term notes, called Lebacs, are coming due next week, Brown Brothers said. "It represents an important challenge."

"Investor concern over the large upcoming rollover of local debt could extend market anxiety," ING analysts said in a note, though they added that they expected the risk of contagion to remain "very limited."

Still, Turkey, another potential flashpoint in emerging markets — especially as oil prices continue to rise — saw its currency continue to fall this week, with the lira down about 2%.