This article is more than 1 year old

This article is more than 1 year old

Argentina’s currency plunged on Monday after the country’s centre-left opposition leader won an election primary, raising the prospect of a return to power for the former president Cristina Fernández de Kirchner.

A stronger than expected victory for Alberto Fernández, whose running mate is the former populist leader, triggered a 30% fall in the value of the peso, which hit a fresh record low against the US dollar on the global money markets.

Fernández dominated the poll against the centre-right president, Mauricio Macri, who has struggled to revitalise the economy and curtail high inflation. The presidential election is due to take place in October.

Fernández secured 47.4% of the vote, against Macri’s 32.3%.

Financial analysts said the prospect of a populist left-leaning government taking over in Buenos Aires could raise the chances of the country defaulting on its debt, which caused markets to slump in response.

Shares in Argentinian companies also fell sharply on Monday, with the country’s Merval stock index tumbling by almost 30%. The cost of insuring government bonds from default spiked, and the price of a 10-year government bond denominated in US dollars fell by between 18 and 20 cents to trade around 60 cents on the dollar.

Edward Glossop, a Latin America economist at the consultancy Capital Economics, said: “The comprehensive victory for Alberto Fernández in Argentina’s primary election paves the way for the return to leftwing populism that many investors fear.”

Other emerging market currencies including the Turkish lira and South African rand fell on foreign exchanges as investors bet that an Argentine debt default might rattle global financial markets.

Argentina and several other developing nations have come under growing pressure over their high levels of foreign currency debt. The US dollar has appreciated in value as the US Federal Reserve has lifted interest rates, which has made it more expensive for these countries to repay their dollar-denominated debts.

Macri, the son of a self-made construction tycoon, had made “zero inflation” a campaign pledge before he came to power in 2015. In reality it has soared to more than 50% as the peso has weakened.

Considered a market-friendly leader, Macri has used austerity measures in an effort to stem the country’s currency crisis, provoking an angry public response.

Argentina relies on support from the International Monetary Fund through a $57bn (£47.2bn) loan intended to shore up the country’s ailing finances.

Fernández has said he could rework the agreement with the IMF should he beat Macri in October, while the prospect of Fernández de Kirchner returning to power has also rattled investor confidence in owning Argentinian assets.

The former president imposed strict currency controls that hit investment during her 2007-2015 administration. She also feuded with the country’s key farming sector over export taxes and was leader during a multi-year standoff with Argentinian government bond holders.

Fernández said the market reactions were in response to Macri’s failure running the economy. “Markets react badly when they realise they were scammed. We are living a fictitious economy and the government is not giving answers,” Reuters reported him as saying.

• This article was amended on 15 August 2019 because the presidential election is due to take place in October, not next month as an earlier version said. This has been corrected.