World Bulletin / News Desk
The Argentine peso has seen its sharpest drop since the country's 2002 economic collapse, pushing Argentina's central bank to begin selling its dollar reserves.
The peso fell from 6.88 per dollar on Tuesday to 7.14 on Wednesday. By the close of Thursday, the peso was at eight to the dollar, and on Argentina's black market, where its currency is weaker still, the peso dropped 6 percent to 13 per dollar.
The Monetary Authority sold an estimated $100 million of its $29.4 billion foreign currency reserves.
Concerns are now mounting over whether the sharp currency depreciation and inflation will slash the country's spending and savings power.
Additionally, economists have warned that the weaker peso would hit companies with higher costs, in dollar terms, for imported products and supplies, leading to a rise in consumer prices and a slowdown in investment.
Jorge Capitanich, Argentina's President’s Chief of Staff, said that the Central Bank did not buy or sell dollars during the decline.
"It wasn't a devaluation spurred by the state," he said. The depreciation was caused by "supply and demand."
Analysts say that unless the government can contain inflation, which is expected to touch 30% this year after averaging 20-25% since 2010, the demand for dollars will remain strong, something that is expected to further push the black market rate. And as the pace of depreciation quickens, more people will take refuge in dollars to protect their savings.
In an attempt to counteract this and maintain its dollar reserves, the government is planning to take legal action against people trading on the black market. This could involve sending tax inspectors and the police to trading houses. Another possibility is that it may ban the publishing of the black market rates in local newspapers.Last Mod: 24 Ocak 2014, 13:58