Argentine Peso Hits Historical Low As US Dollar Hovers Near 2-yr Low

The peso hit a historical low of $72.51 against the US dollar after the Argentine government stated that it had inked an agreement with three consortia of creditors to reorganize $65 billion worth sovereign debt. The government further stated that the deal would pave way for considerable debt relief, with postponement of interest and principal payment dates for bonds. Argentina’s Economy Minister Guzman, revealed that the due date for lenders will be postponed by officially endorsing the fresh agreement to August 24, with payment date on September 4th. For the ninth time in the country’s history, Argentina has defaulted on payment. Specifically, the country failed to repay $500 million interest on its debt securities.

The US dollar index dropped to its lowest level since May 2018, fluctuating around 93.30 after hitting a session low of 92.80, as the US faces the risk of fresh business shutdowns due to Covid-19 pandemic. Investors are centered on debates between Democrats and Republicans on additional stimulus as any fresh package has to be endorsed before the Senate goes for a prolonged break on Friday. At the beginning of this week, better-than-anticipated manufacturing info provided the necessary upward thrust for the greenback after it endured its worst performance in over ten years in July.

The euro dollar rallied towards two-year high of $1.19, backed by a huge relief program endorsed by the EU leaders in July and US dollar weakness. Sentiment was also boosted by higher-than-anticipated PMI data for Italy and Spain, countries that were adversely affected by coronavirus infection. Traders remain worried about unabated spread of Covid-19 pandemic and necessity for additional lockdowns. Furthermore, investors are also concerned about the robustness of economic rebound in the US and the country’s capability to contain the spread of coronavirus infection.

In the Eurozone, industrial producer prices rose by 0.7% m-o-m in June, after contracting a 0.6% decline in the earlier month and greater than economists anticipations for a 0.5% increase. It is the first rise since January as energy costs increased 3.1% in June, after decreasing 1.6% in May. Also price of intermediate goods rose by 0.2%, compared with a decreased of 0.4% in May. While cost of durable consumer goods stood unaltered from 0.1% gain in May, non-durable consumer goods decreased 0.1% (versus negative 0.6%). On y-o-y basis, producer prices declined 3.7%, after falling 5% in May and compared with economists outlook for a 3.9% decrease.

The Swiss franc strengthened to $0.915 Tuesday, hitting a five-year high achieved last week, after latest economic data indicated an improvement in Swiss consumer confidence from a historically low level. In the meanwhile, investors remain worried about economic uncertainties sparked by Covid-19 issue and rising tensions between Beijing and Washington. The SNB President Thomas Jordan has been reaffirming that the central bank will continue to intervene in Forex markets to prevent strengthening of the franc, which is already perceived to be overvalued. Jordan has clarified that the intervention is a must to prevent deflation and safeguard the export based economy. Switzerland is anticipated to continue with its ultra-loose monetary policy for few more months as the country stares at steepest economic decline since the wake of crude price rise in the 70s.

The British pound traded at about 1.31 Tuesday, after touching a five-month high of 1.317 few days before, as the US dollar hit two-year lows on sustained selling pressure. Investors are waiting for the interest rate decision by the Bank of England, which is scheduled to meet this Thursday. Economists believe that monetary policymakers will likely wait for more concrete signal before making any changes to interest rates and continue to purchase bonds at prevailing levels. Furthermore, the UK Prime Minister Boris Johnson has stated that the government would halt easing of lockdown measures for a minimum of two weeks due to an increase in coronavirus infections. Last month, the pound recorded its best performance in a decade in spite of any advancement in Brexit discussions.