Argentina: Peso falls to all-time low in March
March 11, 2019
The Argentine peso depreciated in the last few weeks, despite the Central Bank’s tight monetary policy stance. On 8 March, the currency traded at 41.15 ARS per USD, bottoming out from a record-low of 42.46 recorded the day before. The result represented a notable 8.6% weakening over the same day of the previous month. The peso lost half of its value compared to the same day last year and was 9.3% lower than at the beginning of the year.
The currency’s most recent slide reflects higher than expected inflation in January, growing domestic liquidity and concerns among investors on Argentina’s challenging economic scenario ahead of next October’s elections. The weakening follows several months of substantial stability of the peso, as in October the Central Bank (BCRA) moved to a monetary rule which sets a 0% monthly growth for the monetary base until June 2019. Additionally, in late February, the Central Bank of Argentina (Banco Central de la República Argentina, BCRA) announced it would tweak its guidelines to intervene in the exchange rate market in order to intensify its fight against inflation by limiting potential depreciations in the peso. Moreover, to stem the currency’s slide, on 8 March the BCRA sharply hiked the LELIQ interest rate, helping the peso recover some lost ground.
Looking ahead, the peso is expected to depreciate further due to still-high inflation, although the scope of its weakening should narrow compared to last year thanks to the Bank’s tight monetary policy stance.
Argentine Peso Exchange Rate Forecast
Panelists surveyed for this month’s LatinFocus report expect the ARS to end 2019 at 47.53 ARS per USD. They project the Argentine peso will trade at 54.78 ARS per USD at the end of 2020.
