Argentina's peso slumped on Friday, underperforming the broader Latin American markets and recording its worst monthly performance ever, after ratings agency Standard & Poor's announced it was slashing Argentina's long-term credit rating to "junk."
The ratings action follows the government's announcement to "re-profile" some $100 billion in debt earlier in the week, sinking Argentine bonds and igniting worries of a full-blown debt crisis for Latin America's third-largest economy.
Fitch downgraded Argentina to "RD" status - restricted default - late on Friday, indicating selective payment default on a specific class or currency of debt. "While the government's plans could alleviate some of the short-term liquidity pressures, implementation risks are high and further underscore the lack of policy tools to restore market stability," Goldman Sachs analysts said in a note.
The peso fell nearly 3% on the day and logged its worst month ever, down 26.3%, surpassing a plunge of 25.8% during the August 2018 monetary crisis.
The carnage in Argentine markets started after business-friendly President Mauricio Macri suffered a thumping defeat in primaries at the hands of Alberto Fernandez, stoking fears that the return of a leftist government could herald a new era of interventionist policies.
Argentina's MerVal stock index maintained enough liquidity to rise nearly 4% on Friday, helped by exporters that benefit from a weaker currency, but has shed nearly 40% through the month.
The rest of the Latin American markets took comfort from US-China trade hopes, with stocks rising nearly 2%.
Sao Paulo-traded stocks climbed 0.8%, while the real gained 1%. August has been the currency's weakest month in four years, exacerbated by market positioning, aggressive bets on lower interest rates and the crisis in neighboring Argentina.
Chile's peso dipped marginally, ending the month over 2% lower as falling copper prices have taken a toll on the world's top producer of the red metal.
Colombia's peso fell 0.2% ahead of the central bank's monetary policy decision. Analysts in a Reuters poll in July indicated policymakers will likely hold borrowing costs to boost slow growth.
Markets in Peru were shut for a local holiday.