The Argentine peso closed up 2.9 percent on Thursday, reflecting investor optimism that a recession-hit country would reach a new agreement on conditional IMF financing to ensure the government's ability to meet its debt.
The peso was trading at 38.25 against the US dollar at the end of the session. The local currency has lost about half its value this year as investors worried about whether Argentina would meet its debt obligations next year, prompting the government to seek IMF support.
An IMF spokesman said on Thursday that "significant progress" had been made in talks between the IMF and the government to promote a $ 50 billion conditional loan agreement signed in June.
Investors say the peso also received support from a strong demand for foreign investors at an auction to sell government debt on Wednesday. Traders say short-term $ 950 million worth of short-term treasury instruments have been sold to foreign investors. Treasury instruments were issued at an interest rate of about 50 percent.
The sale of the peso began in May, driven by rising inflation and doubts about the central bank's ability to repay its short-term growing debt. The economy has since slipped into recession, with inflation hitting more than 34 percent in the 12 months to August.
Last month, President Mauricio Macri was forced to renegotiate the IMF agreement, pushing policies aimed at getting rid of the country's budget deficit next year in exchange for cash from the IMF faster than planned.
His administration expects this year's deficit to be 2.6 percent of GDP. On Monday, the government unveiled its budget proposal for 2019, showing cuts in spending and increases in export taxes as a means of balancing the budget.
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