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Argentine Peso Suffers Biggest Fall For 12 Years

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http://www.telegraph.co.uk/finance/currency/10593363/Argentine-peso-suffers-biggest-fall-for-12-years.html

The Argentine peso has plunged 11.1pc against the US dollar, the sharpest one-day fall since 2002, as the central bank appeared to stop trying to defend the currency amid mounting capital flight.

The peso fell to 8.01 to the US dollar from 7.1, and followed Wednesday's 3.2pc loss.

That took the currency's depreciation so far this year to nearly 19pc, creating deeper challenges for a government wrestling with falling foreign reserves and mounting inflation.

The Central Bank of Argentina stayed out of the market again on Thursday, after having spent about $120m to defend the currency on Tuesday.

They've already wiped out there pension funds to bail themselves once and the next plan will be?

I'm sure though that this is all priced in?

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http://www.bloomberg.com/news/2014-01-24/argentina-seen-extending-world-s-biggest-currency-decline.html

Argentina’s peso is poised to extend losses after the government devalued the currency 12.7 percent in a bid to arrest a decline in foreign reserves.

The devaluation, the biggest since 2002, marked the latest effort by President Cristina Fernandez de Kirchner to shore up an economy buffeted by inflation running at an estimated 28.4 percent and falling reserves. Without a broader policy change to bolster confidence by restraining spending and raising interest rates, the peso is likely to depreciate further, according to Eurasia Group Ltd and JPMorgan Chase & Co.

“Argentina is ‘biting the bullet’ but without a full set of teeth,” Vladimir Werning, an economist at JPMorgan, wrote in a report yesterday. “Insufficient interest rate or fiscal adjustment leaves the devaluation vulnerable to generating more inflation pass-through than achieving real competitiveness gains the government desires.”

The peso dropped as much as 16.5 percent over the last two days to 8.2435 against the U.S. dollar before the central bank intervened in the market by selling $100 million. The move helped trim yesterday’s losses to 9.4 percent from the central bank’s closing price Jan. 22, the biggest daily decline since the financial crisis that followed the country’s record $95 billion default in late 2001. The peso closed at 7.8825 per dollar, and changed hands in the illegal street market at 13.06 pesos per dollar, according to Buenos Aires daily Ambito Financiero, which tracks the rate.

I'm sure the bankers will help.

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It's ok, the MMTers have assured us that a sovereign can't go bankrupt as long as it has a printing press. rolleyes.gif

I'm no MMTer but feel they deserve defending here. They're very specific in saying that a country with debts denominated in its own currency has no need to default, they kinds of commonsense though, not just MMT. Argentina has many foreign currency liabilities, which a printing press would be no good for, and MMT never says otherwise about foreign currency debts.

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Argentina were shut out of the world capital markets in2002. Much of the pre 2002 debt is held by Japan and Germany (60%). They have been in default for ten years, it really wouldn't make much difference what happened to Argentina. If the Japanese and German banks were still booking these loans after a decade then clearly they are stupid.

Edited by crashmonitor

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The CIA World Factbook starts its overview of the economy of Argentina with the sentence "Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base."

How does such a country suffer such high inflation and its currency lose so much international purchasing power so many times in recent years?

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How does such a country suffer such high inflation and its currency lose so much international purchasing power so many times in recent years?

Because they take advice from the IMF...

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1390598959[/url]' post='1102455585']

The CIA World Factbook starts its overview of the economy of Argentina with the sentence "Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base."

How does such a country suffer such high inflation and its currency lose so much international purchasing power so many times in recent years?

Because as well as a literate population they are also home to some of the worlds most accomplished currency forgers?

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Because as well as a literate population they are also home to some of the worlds most accomplished currency forgers?

Sometimes think thank God we are 99% computer digits these days, difficult to debase the currency on the remaining 1% with forged paper. The recent computer hacking episodes excepted.

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The CIA World Factbook starts its overview of the economy of Argentina with the sentence "Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base."

How does such a country suffer such high inflation and its currency lose so much international purchasing power so many times in recent years?

Probably precisely because they have rich natural resources etc.

Otherwise they would lose their international purchasing power only once.

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Because as well as a literate population they are also home to some of the worlds most accomplished currency forgers?

That would have very little effect in the value of the currency. And they might not even be forging Pesos. Might opt for the US Dollar instead.

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Well I didn't expect a country that had been locked out of the world capital markets for 12 years to have a significant impact on Markets....however, the Sunday papers seem to point to the Argentinian crisis as a reason for a small adjustment downwards in equities and a small rise in gold.

Perhaps China's slowing is more significant, at least on the equity front.

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I'm no MMTer but feel they deserve defending here. They're very specific in saying that a country with debts denominated in its own currency has no need to default, they kinds of commonsense though, not just MMT. Argentina has many foreign currency liabilities, which a printing press would be no good for, and MMT never says otherwise about foreign currency debts.

Deflation IS default.

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Deflation IS default.

Don't you mean inflation? Either way that is nonsense yet still pops up lot recently.

Any investor in a non index linked bond is making a call on what they think inflation is going to be and balancing it against the nominal return on the bond. If they get it wrong they can't go claiming the bond has defaulted.

The common quality of default is a change in the expected cash flows, whether a hard default, where you plain dint get them? Or a soft default when terms are changed, like maturities being extended. Inflation eroding your real return is just a bad call. You're still getting your hundred quid back when you were expecting it. If an investor is worried about inflation they should buy something else.

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Don't you mean inflation? Either way that is nonsense yet still pops up lot recently.

Any investor in a non index linked bond is making a call on what they think inflation is going to be and balancing it against the nominal return on the bond. If they get it wrong they can't go claiming the bond has defaulted.

The common quality of default is a change in the expected cash flows, whether a hard default, where you plain dint get them? Or a soft default when terms are changed, like maturities being extended. Inflation eroding your real return is just a bad call. You're still getting your hundred quid back when you were expecting it. If an investor is worried about inflation they should buy something else.

Technically correct but inflation will still feel like a default if you're on the losing side of the trade. Then there's the question of bona fides. Inflations don't happen by accident. The sovereign is clearly choosing to favour one cohort of investors over another by reneging on its promises re. the cost of living.

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http://www.bbc.co.uk/news/business-25913170

Argentina said citizens can buy up to $2,000 (£1,210) per month if their monthly salary is over 7,200 pesos ($900), after a two-year ban on buying dollars.

But large businesses and investors will not be able to make the purchases.

Last week, Argentina said it would ease restrictions after the peso fell 11%, its sharpest daily fall in 12 years.

US dollars could previously only be bought by citizens on the black market, which fuels the country's inflation.

Black market dollars driving inflation.....

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Are they saying only the relatively well off are allowed to buy us dollars?

Sod the poor they have to use the peso.

Tax rebates for dollars stored in the house...

Edited by Ash4781

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