BUENOS AIRES (Reuters)

Argentina’s peso closed 6.6% higher on Wednesday, regaining ground lost after a tumble caused by lifting capital controls earlier in the week.

The currency ended the week, shortened due to the Easter holiday, at 1,125 pesos per U.S. dollar, which is 4.4% lower than the previous week’s closing price.

On Monday, the peso fell after the government reversed significant parts of long-standing capital controls, placing it in a gradually expanding band between 1,000 and 1,400 pesos per dollar.

Since then, the currency has shown signs of stabilization, surprising analysts. Fixed-term deposit rates also rose, increasing from 28%-30% on Friday to 35%-37% on Wednesday.

“Rates in pesos are once again above the implied rates of dollar futures, which would leave the exchange market facing an excess flow of dollars that could lead to an appreciation of the peso,” said economist Gustavo Ber.

Libertarian President Javier Milei, who supported removing currency controls, stated on Wednesday that the central bank would not intervene unless the peso drops below the 1,000 per dollar mark. “There will be no intervention until it reaches the floor,” Milei announced on X.

Argentina’s foreign reserves have increased recently, following a $12 billion inflow as part of a $20 billion agreement with the International Monetary Fund (IMF) on Tuesday, along with an additional $1.5 billion from the World Bank.

These funds brought reserves up to $38.61 billion at the end of the day on Wednesday.

Capital Markets Argentina commented that “the agreement with the IMF will also provide strong dollar support to the central bank,” adding it will boost confidence in the new exchange-rate scheme and its stability within the set band.