Argentina Currency Guide – The Argentine Peso

A country located in South America, widely known for its high-quality beef, Argentina is one of Latin America’s rising economies. With their growth measured at 94 percent between 2002-2011 according to statistics from the International Monetary Fund, it is one of the fastest improving economies in the Western Hemisphere. Once known as the peso convertible, the peso is Argentina’s official currency. Each peso is equal to 100 centavos. Pesos are available in six different bill denominations from two to 100. Coins come in amounts ranging from five centavos to five pesos. The Argentines use the dollar sign to symbolize their currency.

Between 1985 to 1991, Argentina?s currency was the austral. A new peso was created in 1991. The government planned to keep the peso’s value pegged to the U.S. dollar to maintain a better economic balance but when Argentina?s economy went into a recession in 1999, the International Monetary Fund assisted in organizing a $40 billion bailout package for the country which Argentina rapidly defaulted on. Afterwards, the government imposed stricter banking regulations, one of which was deciding that the peso would no longer be pegged to the dollar. Since February of 2002, the Argentine peso has been a free-floating currency, losing slightly more than half of its value. The Argentine peso is a non-convertible currency that is traded as a non-deliverable forward off and on-shore.The Central Bank undertakes both purchases and sales of US dollars as these sales relate to market conditions. The Argentine treasury also closely monitors the peso, the aim of their involvement to cushion currency volatility. This strategy includes inhibiting capital inflows caused by a sudden rise in supplies of the US dollar.

While the peso was deeply devalued a decade ago, the Sharpe ratio of the Argentine peso today indicates that the peso could be an attractive emerging market monetary unit for investors who purchase higher-yielding currencies with finances borrowed in countries with lower interest rates. One of the most commonly carry-trade currencies in the money markets, it’s important to consider that the Argentine also known as the ARS, is considered illiquid and limited. It can be tough to sell Argentine pesos when exiting a trade conducted with them. The government monetary authority actively manages the onshore FOREX market for both spot and futures. investing in peso-denominated financial products may not be as recommended by some money managers when compared to better performing and more popular regional currencies such as the Brazilian real.
Regardless of conflicting takes on the peso, it’s on the watch list of many top Wall Street analysts.