Peg Ain’t Crawling No More

ARGENTINA - Report 24 Jan 2014 by Joaquín Cottani and Domingo Cavallo
Two days ago, the Central Bank of Argentina (BCRA) surprised markets by failing to intervene as expected; hence letting the official USDARS rise from 6.93 to 7.14. Yesterday, the spot rate closed at 7.75 after reaching 8.3 in the intraday market, which forced the BCRA to intervene (it sold $180m in the last couple of hours). Such a discrete jump in the official rate (12% in two days) is in sharp contrast with the “mini-devaluations” that existed until then (and were in place since 2003). To wit, before January 22, the average daily rate of depreciation was 0.3% in the year to date and less ...

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