Sign In with Google
Sign In with Facebook
Argentina's Currency Crisis
Argentina's unofficial peso exchange rate suffered a drastic slide of 5.6% on Wednesday, plummeting to a new low of 1,250 to the dollar. This further stretches the disparity with the official rate to beyond 50%, emphasizing the growing strain on the troubled currency.
Root Causes of Economic Woes
Battling with an inflation rate exceeding 200%, Argentina finds its savings dwindling and peso-based assets less appealing. The official exchange rate of the peso hovers around 819 per dollar, after experiencing a severe devaluation last month. Strict capital controls are the only thing preventing a complete collapse.
The Underlying Factors
Experts noted that the gradual 2% monthly devaluation of the peso is failing to match soaring inflation rates, increasing the divergence in the exchange rates. Even though this gap is relatively smaller than the period prior to last December's devaluation, it’s still substantial.
The decision to allow importers to pay off new Bopreal bonds via alternative currency markets in order to secure foreign currency has exacerbated the pressure on the peso, according to traders.
Actions by New Argentine Leadership
The new libertarian President of Argentina, Javier Milei, who is presently in Davos, is fighting to mend the country's deepest economic crisis seen in many years. The country faces triple-digit inflation, depleted foreign currency reserves, and an impending recession.
Argentina, a country famed for grain production, has maintained several unofficial exchange rates since 2019. Currency controls were introduced to stem the flight from the peso and protect dollar supplies. Over the past year, this chasm has at times reached a staggering 200%.
