Argentina: Argentine peso tumbles to new all-time low in June
June 29, 2018
The Argentine peso continues to depreciate, despite Central Bank efforts to stem the currency’s slide. On 29 June, the currency traded at a record-low 28.94 ARS per USD. The result represented a steep 16.5% weakening over the same day of the previous month. The peso was 58.9% weaker compared to the same day last year and 55.6% lower than at the beginning of the year.
The currency’s most recent slide reflects growing concern among investors on Argentina’s ability to implement IMF-mandated reforms amid a challenging economic scenario at home. Uncertainty persists despite a series of measures implemented by the government and the Central Bank to shore up the battered currency. On 18 June, the Central Bank increased the minimum reserve requirement by 5 percentage points to absorb excess peso liquidity in the market. The measure aims at taking in ARS 100 billion from the financial system to ease pressure on the U.S. dollar. Limits on foreign currency deposits held by private banks were reduced from 10% to 5%, allowing banks and private entities to carry out spot foreign exchange purchases. Following the announcement of these measures, the peso stabilized around the 27.40 ARS per USD threshold but started to depreciate again starting on 28 June, likely reflecting in part the release of disappointing industrial production data from the second quarter.
Looking ahead, the peso is expected to depreciate further due to widespread uncertainty over the economy’s health.