Argentine Peso Breaks Historic Low Mark as Argentines Hedge Savings in Dollars

Rising, Argentina’s fiat currency hit a historic low as citizens ran to exchange their holiday payments into dollars. The US dollar reached a value of 356 pesos on Dec. 28, dropping almost 10% in just over a week and threatening to spur an even bigger rise in inflation.

The Argentine peso fell to an all-time low.

One of the Latin American countries with active foreign exchange controls, Argentina I am having a hard time maintaining my value. The exchange rate between the US dollar and the Argentine peso hit historic levels, with the peso declining to an all-time low on her December 28th. The dollar reached a price of 356 pesos in parallel cash units, also known as “blue pesos.” It ended November with a value of 314 pesos per dollar.

The Argentine peso’s plunge accelerated last week, wiping out more than 10% of its value. Since the beginning of 2022, the Argentine currency has lost more than 70% of its value, starting the year at a value of 207 pesos per US dollar. The decline caused Argentines to lose their peso-based savings and move to dollars and stablecoins as a hedge.

Explanation and Impact

Analysts who try to explain the historic decline in currency values say there are two main factors that make the exchange rate soar. The first has to do with the abundance of pesos in the market for payments made by businesses and the growing demand for dollars in ecosystems with exchange controls.

Another concerns the political and legal uncertainty created by Argentina’s President Alberto Fernández’s attempt to disobey orders from the Supreme Court of Argentina, a situation still evolving. on the way. Whatever the cause, this sharp rise threatens to bring even higher levels of inflation to a country expected to end the year at 100% inflation levels.

Argentine economist Juan Pablo Albornoz expects this to affect the country’s price structure. He said :

that this rise will affect prices in the usual months after a nominal sharp jump in the value of this rate There is a possibility.

Despite the Argentine government signing a price control deal, the volatility could cause disruptions affecting next year’s inflation target. Eugenio Mari, economist at Fundacion Libertad, explains: As a result, the exchange rate becomes the fundamental variable that companies and workers follow to adjust their prices.

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