The Argentine peso is suffering its fastest fall since Argentina's 2002 economic collapse as dwindli

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• published: 31 Jul 2015
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The Argentine peso is suffering its fastest fall since Argentina's 2002 economic collapse as dwindling reserves keep the Central Bank from trying to prop up the currency by intervening in the foreign exchange market. Analysts said the 16 percent loss in the peso's official value against the dollar over Wednesday and Thursday could worsen the country's inflation, which is already among the worst in Latin America. The peso fell from 6.88 per dollar on Tuesday to 7.14 on Wednesday. By Thursday's close, it was at eight to the dollar. On the black market, where Argentina's currency is even weaker, the peso dropped six percent Thursday to 13 per dollar. The sharp depreciation is likely due to a new government strategy of seeking a sudden devaluation instead of a gradual one, said Dante Sica an economist and former industry, trade and mining minister. "Since last Tuesday, the government failed to intervene in the market, or has stopped selling dollars and has let the exchange rate jump. This no-government intervention on Tuesday resulted in a small jump on Wednesday and today it resulted in a much bigger jump. It has positioned the exchange rate with a sharp devaluation of eight (Argentine) pesos (referring to the fall of eight Argentine pesos to the US dollar.) What is not yet clear is what will happen tomorrow, " Sica explained Some analysts expect Argentina's inflation to reach more than 30 percent this year - the second highest rate in Latin America after Venezuela. Critics of the left-leaning government blame economic problems on its higher spending on social programmes, expansion of business regulation and nationalisation of some companies. Argentina has been kept from global credit markets since defaulting on its debt during its 2001-2002 financial crisis. So officials have been trying to keep dollars in the country for the Central Bank to use to pay off government debts. But the bank's reserves have plunged to 29 billion US dollars, the lowest level in more than seven years despite increasingly restrictive currency controls meant to stem capital flight. The controls make it nearly impossible to legally trade pesos for dollars, but many Argentines have turned to black market money changers to obtain dollars. Many in the country are haunted by memories of the financial crisis, when banks froze deposits and the currency lost value, and they want dollars to keep in emergency stashes. You can license this story through AP Archive: http://www.aparchive.com/metadata/youtube/9a864740a1b825937b40af0a91fe8979 Find out more about AP Archive: http://www.aparchive.com/HowWeWork