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Argentina’s peso tumbled as much as 30 percent as newly inaugurated President Mauricio Macri fulfilled his campaign promise of letting the currency float freely.

Macri’s push for a devaluation was a key part of the economic overhaul he says is needed to lure investment and jump-start an economy suffering from lackluster growth, inflation estimated at 25 percent and a shortage of dollars. The decline brought the official rate closer in line with where the peso had been trading in unregulated markets.

The free float also carries risks, with the currency’s plunge potentially exacerbating inflation and spurring a backlash from Argentines who see the value of their savings sink in dollar terms. Finance Minister Alfonso Prat-Gay, in announcing the move to end the central bank’s support for the peso and currency controls that limited the ability of Argentines to buy dollars, said Wednesday that the central bank is ready to intervene should declines in the peso spiral out of control. Trading was orderly and volumes were below normal after dollar buyers stocked up in prior days, market participants said.

Currency Exchange House in Buenos Aires. Photographer: Diego levy/Bloomberg

"It’s a positive start that should help instill a confidence shock and anchor investor expectations, at least on the short term,” said Patrick Esteruelas, a senior sovereign analyst at EMSO Asset Management, which oversees $2.6 billion. “In the medium term, people will be watching to see what’s the inflationary and sociopolitical impact, and whether it will affect this administration’s ability to continue to govern."

The peso weakened 27 percent to 13.4 per dollar as of the close of trading on the MAE electronic trading platform, after sinking as low as 13.95. On the black market, which Argentines used to skirt the controls that limited their ability to buy greenbacks, the currency had most recently traded at about 14.5 pesos per dollar. Three-month non-deliverable forwards weakened 1.7 percent to 14.9 pesos per dollar.

The Merval benchmark stock index slumped 1 percent. Dollar bonds due 2033 rose 1.1 cent to a three-week high of 113.5 cents on the dollar.

"Lifting the currency controls means lifting the hurdles that have been restraining the economy for years," Prat-Gay told reporters in Buenos Aires. "This is going to kickstart the economy and put it on the path of growth."

Argentina expects between $15 billion and $25 billion in inflows over the next month to bolster reserves. The government struck an accord with grain exporters to bring in $400 million a day for the next three weeks and expects to raise more than $5 billion in financing from banks who will purchase a central bank note, Prat-Gay said on Wednesday. At the same time, the central bank will convert the equivalent of $3.1 billion of yuan obtained in a currency swap with China into U.S. dollars to boost liquidity in reserves.

Macri took office Dec. 10 with foreign reserves at a nine-year low. The government has a limited ability to borrow overseas because of a legal dispute with creditors who declined offers to restructure bonds left over from the country’s 2001 default. Macri has said he intends to seek talks with the so-called holdouts to regain access to capital markets. Argentina defaulted for a second time in 13 years in 2014 after the government refused to abide by a U.S. court order to repay the bondholders.

Exchange houses in downtown Buenos Aires were calm. Activity on Calle Florida, one of the city’s busiest pedestrian shopping streets and epicenter of street currency trading, was muted. Many exchange houses were still awaiting instructions from the central bank.

Until today, Argentines had to seek tax-agency approval to buy a limited amount of dollars for travel or savings. If those options failed, individuals turned to a black market where the peso traded much weaker than the official rate. The tracking of the black market rate had become an obsession in the country with its value displayed prominently on television news programs and on front pages of the country’s main newspapers.

Black-market currency traders still dotted Florida on Thursday, shouting “exchange, dollars, euros and reais.”

Advocates of a free-floating exchange rate have argued that Macri’s best bet to bring dollars into the country would be to devalue the peso, which would encourage farmers to sell hoarded crops that they’ve withheld from markets as they await better prices and also fuel inflows from foreign investors and businesses.

“This is a significant and bold step toward the correction of the main price distortion currently affecting the economy, and more importantly toward the implementation of a sound, sustainable and credible policy framework,” Mauro Roca, a New York-based economist at Goldman Sachs Group Inc., wrote in a report.

On Monday, Macri scrapped taxes on beef, corn and wheat exports and reduced a tax on soybean exports. The country’s farmers are ready to ship an estimated $8 billion in stored crops, according to five farmers, analysts and exporters interviewed by Bloomberg after the election. A devaluation would further help farmers trying to sell abroad.

Morgan Stanley estimates that quick devaluation of the peso may lead inflation to accelerate to 35 percent in 2016. Economic growth, which has been largely stagnant the past four years, is expected to expand 0.6 percent in 2016 before jumping 3.6 percent the following year, according to the median estimate of 20 economists surveyed by Bloomberg.

The central bank on Tuesday raised yields on its shortest-maturity notes to as high as 38 percent in the first weekly auction overseen by bank President Federico Sturzenegger in a bid to stoke demand for peso assets. A benchmark deposit rate known as Badlar rose to 25.8 percent on Tuesday, the highest since April 2014.

“I think there is still room for further ARS weakness ahead, but Macri is making all the right moves to get the nation back on track from a medium-term viewpoint,” Win Thin, head of emerging-market strategy at New York-based Brown Brothers Harriman & Co., said in an e-mail. “Short-term, think there is a lot of pain still to be felt.”

— With assistance by Charlie Devereux, and Katia Porzecanski