Argentina to Ease Currency Controls

Government will allow Argentines purchase of dollars in proportion to their income and reduce tax on buying foreign currency.

Argentina scrapped some of its currency controls a day after devaluing the peso as policy makers sought to stem a financial crisis and restore investor confidence by reversing measures that drove foreign reserves to a seven-year low.

Bonds fell and the cost to insure the South American nation’s debt against default soared to a three-month high as traders bet the move could backfire and lead to further dollar outflows. The peso dropped 1.5 percent, to 8.0014 per dollar, at 3:34 p.m. in Buenos Aires, extending its plunge this week to 15 percent, the worst selloff since a devaluation that followed the country’s record sovereign default in 2001.

The cost to insure Argentine debt against default for five years soared the most since August, climbing 1.94 percentage points to 23.76 percentage points, according to data compiled by Bloomberg.

The extra yield investors demand to buy Argentine bonds instead of U.S. Treasuries widened 16 basis points, or 0.16 percentage point, to 1,012 basis points, according to data compiled by JPMorgan Chase & Co. Stocks slumped, driving the benchmark Merval index down more than 4 percent in the past two days.

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