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UPDATE 1-Argentine peso stabilized by capital controls, uncertainty seen ahead

Hugh Bronstein and Gabriel Burin

ahead@ (Updates peso level, add bond spread data, analyst quote, political and economic context, bylines)

BUENOS AIRES, Sept 9 (Reuters) - Argentina's peso was unchanged on Monday as capital controls brought stability to a market thrown into tumult last month when a populist-leaning presidential candidate won the primary and appeared firmly on track to win the Oct. 27 general election.

The currency was flat at 55.8 per U.S. dollar, having risen last week after the government clamped down on access to and overseas transfer of greenbacks. The measures, aimed at ending a run on the peso, were taken on Sept. 1 after the currency lost about a quarter of its value in August.

"In the short term, the capital controls are working, and should continue to work for some months," Gabriel Zelpo, an analyst with Buenos Aires consultancy Seido, said in a telephone interview.

Over the longer term, the inflation-and recession-stricken economy faces a host of uncertainties as presidential challenger Alberto Fernandez marches toward an expected October win over business-friendly incumbent Mauricio Macri, whose re-election campaign has faltered along with the economy.

Analysts have increased their 2019 inflation forecasts to 55%, with consumer prices rising in step with the peso's collapse. The economy is now expected to shrink 2.5% this year.

Country risk fell below 2,000 basis points on Monday for the first time since Aug. 27, according to JP Morgan's Emerging Markets Bond Index Plus. But questions remain about Argentine creditworthiness since the administration said last month it would extend maturities on about $100 billion of debt.

The debt "reprofiling" and capital controls were major setbacks for Macri's free-markets reform effort. He took office in late 2015 promising to use orthodox economics to end the cyclical crises that have hobbled Argentina over recent decades.

His popularity was high during the first half of his term. But voters ended up rebelling against his fiscal belt-tightening program under a $57 billion International Monetary Fund loan deal which included subsidy cuts that triggered big increases in household power and heating gas bills.

Macri negotiated the IMF pact last year, when a previous run on the peso brought up questions about the government's ability to honor its dollar-denominated bonds.

(Reporting by Hugh Bronstein, Gabriel Burin, Eliana Raszewski; Additional reporting by Walter Bianchi; Editing by Richard Chang)