Country risk soars, traders dump assets as fears of Argentina default loom

Country risk soars, traders dump assets as fears of Argentina default loom

Country risk soars, traders dump assets as fears of Argentina default loom

Official results showed that in the primary elections that featured 10 presidential candidates, Macri and his vice presidential running mate, Miguel Angel Pichetto, of the ruling party received just 32.08 percent of the votes, with 98.67 percent of the ballots counted, while Alberto Fernandez and his vice presidential running mate, ex-president and current Senator Cristina Fernandez, of the opposition party Frente de Todos - Front of All - garnered 47.65 percent.

LONDON, Aug 13 (Reuters) - The Japanese yen remained near seven-month highs on Tuesday and the U.S. dollar supported, as investors unnerved by the Sino-U.S. trade war, protests in Hong Kong and a crash in Argentina's peso currency sought safety.

The price of insurance against Argentine government bankruptcy jumped again on Tuesday as investors continued to react negatively to President Mauricio Macri's heavy defeat in the country's primary elections this weekend, BNR reported.

Investors fear that if Macri doesn't win a second term in October, the opposing team of left-leaning Alberto Fernández and his running mate - the former leader Cristina Fernández de Kirchner - will undo the progress Macri has made to regain the trust of investors in Argentina and overseas.

Investors are anxious that Argentina will default on its debt again.

Credit-default swaps showed that traders were pricing in a 75 percent chance that Argentina will suspend debt payments in the next five years.

The markets view Fernández and Kirchner, seen as free-spending left-wing populists, with deep suspicion. This, in turn, negatively affected the peso and pushed the citizens of Argentina to invest in cryptocurrency.

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

On Friday, Wall Street snapped a three-day winning streak after U.S. President Donald Trump said Washington was continuing trade talks with Beijing, but that the U.S. was not going to make a deal for now. It was also punctuated by another default that made the country an global pariah for years. "Without moderation of the Fernandez duo and regarding increasing expectations of another fight with the International Monetary Fund, I would not exclude that the peso could hit 100 level to the [US] dollar in the next 12-month period".

Lipka, whose outlook on Latin America currencies has been amongst the most accurate since the second quarter of 2018, said a rate of 100 pesos per dollar wasn't his base case, but that he does expect extreme volatility in the coming weeks.

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

Macri still hopes to reverse the result in October.

Global growth should re-accelerate later this year as major central banks cut interest rates and recent economic data proves better than where markets have traded on it, Bangsund said.

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