Monday, August 12, 2019

Argentine peso drops 25% against dollar following leftist victory

The graph above shows that the price of argentine peso in dollars went from 45 to 61 pesos/dollar, a depreciation of the peso by about 25%, following the election victory by a "leftist."

We can infer several things from the Chart. First the depreciation of the peso indicates that the markets think that demand for dollars will increase in the new regime.  Speculators' increase in demand for dollars may be due to the expectation that the leftist regime may may try to print pesos to stimulate the economy, weakening the peso.  If speculators expect the peso to be weaker in the future, they should sell pesos to buy dollars now to preserve wealth.  That looks like what is happening. 

1 comment:

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