Argentine Peso Hits Record Lows On Increased Uncertainty
Sober Look | Aug 24, 2014 01:16AM ET
Argentina is showing signs of stress, as the official exchange rate has the US dollar now quoted 8.4 pesos - a new record.
The "parallel" exchange rate also hit a record, with the dollar quoted at 14 pesos - a 67% premium to the official rate. Note that before the first devaluation in 2002 (see this NY Times story ) it was one peso to the dollar.
As discussed earlier, this peso decline should not be a surprise. The latest development in the default saga however is Argentina's recent attempt to pay the "non-holdout" bondholders by allowing them to convert to local bonds.
NY Times : - But the draft of the legislation, which was first announced on national television late Tuesday by Cristina Fernández de Kirchner, Argentina’s president, has raised more questions than answers among investors who are looking for a solution to the country’s debt predicament.
The uncertainty, combined with deteriorating economic fundamentals is sending depositors and investors out of the country, pressuring the peso. Foreign reserves are likely to dwindle materially by the end of the year as a result, further exacerbating the crisis.
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