Published: Wed, August 14, 2019
Finance | By Loren Pratt

Yen and dollar rise as investors seek safety

Yen and dollar rise as investors seek safety

Yesterday was indeed a brutal day for the Argentine financial markets following the news of Mauricio Macri's severe defeat at the country's primary election this weekend, which drastically reduced the chances of a pro-business president to win an official election scheduled for October.

Argentine equity indexes were up by more than 5%, a minor rebound considering that on Monday stocks lost on average 37% of its value, a historic decline.

Argentina's president, Mauricio Macri, lost in presidential primaries by a wider margin than expected, triggering worries about a return to interventionist policies under a populist victor.

Expectations that rates will be cut by 25 basis points rose to 95.0% from 84.6% a day prior as fewer traders bet on a more dramatic 50-basis-point cut next month. But then it fell again and was down 2.29 percent.

The upset, widely seen as a preview of October's presidential vote, threw the doors open to the very real possibility a more protectionist government will take power come December and unravel the hard-won gains that Macri made to regain the trust of the global markets.

Other safe havens like Treasury debt also saw prices fall as investors moved money into riskier assets.

The government and its subsidiaries now have US$15.9 billion in debt payments denominated in dollars and euros due in 2019, according to data compiled by Bloomberg.

Equity, debt and currency markets sharply reversed course minutes after Wall Street opened for trade on news from Hong Kong about a call Chinese Vice Premier Liu He held with USA officials, according to China's Commerce Ministry. And, of course, it was also punctuated by another default that made the country an global pariah for years.

The stunning loss sent Argentine markets reeling. "I do not see a silver lining in the results". "Although you would not expect that to happen during 2019", an Argentinian broker said. "Without moderation of the Fernandez duo and regarding increasing expectations of another fight with the International Monetary Fund, I would not exclude that peso could hit 100 level to the dollar in the next 12-month period".

Incessant concerns that a trade accord would not be finalized before the 2020 United States presidential election heightened after Goldman Sachs came out as the newest investment firm to slash its USA growth forecast and cautioned a trade stalemate would arise after the polls.

In an interview for Bloomberg, Fernandez also added, "Nobody believes Macri can pay back the debt".

In a press conference Monday, Macri said he still has a shot to reverse the trend in October and that his economic team is working on measures to address voter concerns on the economy.

While Anthony Pompliano said in a tweet that this could be the first of a series of a currency crisis that might lead to a domino effect where Bitcoin will be the only safe haven.

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