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Argentine peso drops to record low

After equities, investors are taking out their disappointment with Argentina’s failure to win back its status as an emerging market on the country’s currency.

The Argentine peso slumped as much as 2.1 per cent on Wednesday to hit a record low of 16.47 per dollar after MSCI confounded expectations last night and left Argentina as a frontier market.

That takes the peso’s loss since the start of 2017 to 3.5 per cent, enough to relegate it to the position of this year’s worst-performing emerging market currency.

Since Mauricio Macri, Argentina’s president, lifted currency controls and floated the peso 18 months ago, it has endured choppy periods of trading. It had been up as as much 4.5 per cent against the dollar on the year to date as recently as April. But it pared those gains as crude oil prices came under pressure again.

An MSCI upgrade would have immediately created a far bigger pool of assets that could potentially invest in Argentina, as well as stronger demand for the peso.

As analysts at Nomura noted:

The refusal of MSCI to upgrade Argentina from frontier to emerging markets status may pose a risk of reversal of the recent portfolio inflows and likely reflects a cautious approach.