16.12.202519:33:22UTC+00Argentinean Peso Slumps After FX Band Reset

The Argentine peso has breached the 1,450 mark against the US dollar, drawing closer to historically low levels. This decline follows the central bank's decision to tie the foreign exchange trading band to inflation, effectively accelerating the peso's depreciation and shifting expectations towards a weaker nominal trajectory. The adjustment replaces the previous 1% monthly currency devaluation with changes aligned with monthly inflation rates of around 2.5%, thereby formally endorsing quicker peso devaluation. This move has led businesses and households to expedite their demand for dollars and ramp up hedging activities. Concurrently, the plan to rebuild the country's dwindling reserves through gradual dollar acquisitions, alongside an increase in the monetary base to approximately 4.8% of GDP, has diminished the central bank's ability to counter currency pressures in the short term, especially in a thin foreign exchange market. These policy adjustments clash with Argentina's fragile external position, significant near-term debt obligations, and still-restricted reserve buffers, exacerbating pressure at the higher end of the trading band.