Monday, November 14, 2011

Central Bank of Argentina Drops Dollar Reserve Requirements

The Central Bank of Argentina cut the dollar reserve requirements to 20%, compared to previously where banks were required to keep all dollar savings not earmarked for trade finance at the central bank.  The move is designed to assist financial institutions to meet their client demands, and follows a $645 million drop in deposits last week, according to Bloomberg.  The Argentinian Government said [Google Translated]: the "new rule relaxes the minimum requirement of dollars that banks must deposit money in the entity. Thus facilitates the response of the entities to the eventual customer demand. They may have all the dollars that exceed 20% of the reserve and are not provided."

Argentina reported annual consumer price inflation of 9.8% in October, compared to 9.9% in September, and average inflation of 10.12% in 2010.  The Argentinian economy grew 2.5% in the June quarter this year (2.8% in Q1), placing annual GDP growth at 9.1% (9.9% in Q1).  The Argentinian Peso (ARS) has weakened by about 7% against the US dollar so far this year, while the USDARS exchange rate last traded around 4.25.


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