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Banking What is going on with the Blue dollar? Why is it going down?

Read this. Milei try to blame Massa for blue dollar move. It say there is a way for blue dollar to go to 4,000 to $1 US. :eek::eek::eek::eek:

That's not going to happen any time soon. Still many challenges. The FT had a good article today.



The Achilles heel has been the anchoring of the exchange rate policy to a 2 per cent rate of crawl per month, significantly below the average inflation rate. The negative real interest rate is also now a liability. This combination was smart and useful in the initial stages, as it allowed for rapid disinflation, a quick accumulation of international reserves and a reduction of the real value of central bank liabilities. But now, as the real exchange rate is reaching pre-devaluation levels, it is not providing the financial incentives for exporters and other economic agents to turn their dollars into pesos.

This in turn is generating significant pressures in Argentina’s financial markets. Confronted with this situation, Milei’s government is committed to defending the 2 per cent crawl and continues to equate success with large drops in monthly inflation rates. Previous Latin American governments felt compelled to exaggerate their commitment to a fixed exchange rate because their will to adjust economic fundamentals was mild or non-existent. However, in this case, Argentina has set the fundamentals in place and is mistakenly putting its achievements at risk through a disorderly currency adjustment.

To regain market confidence and redirect its stabilisation efforts, the government needs to move to the second stage of its programme. In this phase, disinflation will happen at a slower pace and the government will focus on economic recovery instead. By doing so, Argentina will be able to follow a more sustainable stabilisation path, such as the ones its Latin American peers experienced in the 1990s.

The Milei government needs to set out a clear commitment not to dollarise the economy and to support its currency competition strategy by strengthening the institutions and policies that will allow the peso to overcome the dollar as the currency of choice of Argentines. To do so, the government should send an amendment of its fiscal responsibility law to Congress as soon as possible. This update should establish a zero deficit as its fiscal target for the years to come and should enshrine the central bank’s independence.




 
That's not going to happen any time soon. Still many challenges. The FT had a good article today.



The Achilles heel has been the anchoring of the exchange rate policy to a 2 per cent rate of crawl per month, significantly below the average inflation rate. The negative real interest rate is also now a liability. This combination was smart and useful in the initial stages, as it allowed for rapid disinflation, a quick accumulation of international reserves and a reduction of the real value of central bank liabilities. But now, as the real exchange rate is reaching pre-devaluation levels, it is not providing the financial incentives for exporters and other economic agents to turn their dollars into pesos.

This in turn is generating significant pressures in Argentina’s financial markets. Confronted with this situation, Milei’s government is committed to defending the 2 per cent crawl and continues to equate success with large drops in monthly inflation rates. Previous Latin American governments felt compelled to exaggerate their commitment to a fixed exchange rate because their will to adjust economic fundamentals was mild or non-existent. However, in this case, Argentina has set the fundamentals in place and is mistakenly putting its achievements at risk through a disorderly currency adjustment.

To regain market confidence and redirect its stabilisation efforts, the government needs to move to the second stage of its programme. In this phase, disinflation will happen at a slower pace and the government will focus on economic recovery instead. By doing so, Argentina will be able to follow a more sustainable stabilisation path, such as the ones its Latin American peers experienced in the 1990s.

The Milei government needs to set out a clear commitment not to dollarise the economy and to support its currency competition strategy by strengthening the institutions and policies that will allow the peso to overcome the dollar as the currency of choice of Argentines. To do so, the government should send an amendment of its fiscal responsibility law to Congress as soon as possible. This update should establish a zero deficit as its fiscal target for the years to come and should enshrine the central bank’s independence.




Well they will need to figure something out. I laughed as I had an old article from before the elections bookmarked from October 10, 2023.


"The peso is a currency emitted by Argentine politicians, so it can't be worth excrement, because those pieces of trash don't even work as fertilizers," he said Monday, warning citizens to not hold savings in the local currency.
- Javier Milei
 
Crazy how quickly things change here. It is funny to see the thread name questioning why the blue dollar is so weak and a few months later people asking why it's so strong. I get there are problems with the economy but why all of a sudden is it getting so crazy? Any explanations?
 
Crazy how quickly things change here. It is funny to see the thread name questioning why the blue dollar is so weak and a few months later people asking why it's so strong. I get there are problems with the economy but why all of a sudden is it getting so crazy? Any explanations?
Things can change very quickly in Argentina. But also things can take forever to change at the same time. Right now there are a few various reasons. There was a good article today on it.

 
Today, surprise surprise, it went up again. I'm new to BA and trying to adjust to its economy, though you can never predict anything when it comes to economics.

Don't exchange more than you need. Not sure how long you will be in Buenos Aires but probably a good idea to exchange a few hundred dollars at a time or if you're staying long term, enough to cover expenses for 1 month.
 
I haven't been to the forum in a while as I decided to go to Spain for the summer. I'm coming to BA in October. The exchange rate is nuts! Just a few months ago it was 1,000 to $1. Now I see it's almost 1,500 to $1. Great! Hopefully by the time I come it's 2,000 to $1.
 
The free market dollar has dropped to ARS 1,380 for sale, its lowest price in a month.


Yeah what a bummer. I was getting used to the higher exchange rates but sucks to see Blue dollar and MEP going back down again. I guess I should have exchanged more at 1500 to $1 USD. Hindsight is 20/20.
 
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