What happened

Shares of Argentina-based banks Grupo Supervielle SA (NYSE:SUPV) and Grupo Financiero Galicia SA (NASDAQ:GGAL) are having a strong day Friday. As of 10:45 a.m. EDT, the stocks were up by 15% and 13%, respectively.

So what

This move follows a big drop on Thursday in response to Argentina's central bank increasing interest rates from 45% to 60% in an effort to slow down the free-falling value of its currency. The Argentine peso is down by more than 45% in 2018 and fell by a staggering 15% on Thursday alone. Meanwhile, inflation is running at more than 25% for the year.

Entrance to a bank building, with bank engraved over the doorway.

Image source: Getty Images.

While this move may prove to be successful in halting the currency's decline, it also is a big negative news item for banks. Higher interest rates translate to higher borrowing costs for consumers, which means less business for banks.

As a result, Argentina-based bank stocks like these two have (not surprisingly) performed quite poorly. Grupo Supervielle and Grupo Financiero Galicia are down by 81% and 67% so far in 2018, respectively.

Now what

The point is that today's move seems to be somewhat of a relief rally. After the peso's massive drop in value earlier this week, there was no end to the plunge in sight. On Friday, however, investors got a much-needed pause in the peso's decline, as the currency is trading nearly unchanged on the day. While it's too early to know whether the country's central bank will be successful at preventing a further collapse of the peso, investors seem to be breathing a sigh of relief as the volatility paused.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.