Calm despite Argentina default

MARKETS responded calmly to Argentina's $132bn (£91bn) default as investors had already largely priced in the moratorium on repaying the country's vast debts.

But analysts were expecting the impact to be felt more severely when traders return to their desks after the Christmas break, with Latin American currencies expected to come under pressure, possibly then infecting those of developing countries such as South Africa.

The euro, which hit a two-week low against the dollar on Friday on growing concerns about European exposure to Argentina, steadied against the US currency.

The single currency, which comes into circulation across the Continent next week, was at 88.53 American cents in very thin trading, against 88.92 late on Friday.

Argentina today appeared on the brink of decoupling the peso from its dollar peg as the new administration suspended interest payments on government debt. Spanish banks are seen as particularly vulnerable to the Argentina crisis but HSBC also had $4.9bn in loans outstanding at June.