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Argentina Unifies Exchange Rate: Next months won't be easy - Wells Fargo

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Dec 17, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Córdoba) - Today the official exchange rate in Argentina rose more than 40%, from USD/ARS 9.80 to 14.00. Eugenio J. Alemán, Senior Economist, at Wells Fargo, explains that the move was expected and it will help confidence, but many serious problems lie ahead.

    Key Quotes:

    “Fulfilling one of his most important campaign promises, the Macri administration unified the exchange rate system after four years of capital controls implemented by the Kirchner administration.”

    “Although the move was expected and will help with confidence, the Argentine central bank believes it can defend the peso if it goes above 15 pesos per dollar. However, this is still uncertain, especially because the peso market is not deep, and an attack on the peso to gauge the commitment of the central bank is possible.”

    “On the other hand, inflation expectations have already pushed prices, some say, about 40 percent higher in the last couple of weeks, which will be especially tough for the neediest as the holiday and summer season is upon the country. Thus, inflation is going to be a serious issue during the first quarter of 2016, especially because the government is expected to eliminate consumption subsidies for energy.”
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