Argentina’s central bank stepped in to avoid the peso falling below its lower limit of 1475 pesos to the dollar. It’s the first time the central bank has directly intervened since President Javier Milei started to partially float the currency in April.
A lower exchange rate would mean domestic businesses paying more to import products, and domestic exporters would enjoy higher sales since foreign countries can now get the product cheaper by using less of their currency.
As an exporting country, a lower exchange rate can act as a benefit to its economic growth. With agricultural products making up most of their export, lower exchange rates can attract more foreign buyers, which can improve the balance of trade.
However, with growth declining by 0.1% in the second quarter of the year, investors are starting to be worried about whether Argentina can repay bondholders. With tools already in place, such as higher interest rates and bank reserves requirements, the central bank is running out of props to help stabilise the peso.
Furthermore, with foreign reserves being sold off to also stabilise the peso, it is looking bleak for the Milei government. What Argentina needs to do to return to free market conditions requires extreme cooperation and economic propaganda. This is something that needs to be done now.
Econ Oddities 
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