New peso-greenback currency band could mean 23% devaluation

Argentina has introduced a new exchange rate band for the peso, ranging from 1,000 to 1,400 per US dollar, following the removal of currency controls earlier this week and the announcement of a new financing agreement with the International Monetary Fund (IMF).

If the peso reaches the upper limit of the band, the shift would represent a 23 percent devaluation compared to the previous official rate. Government officials indicated they do not expect the currency to move immediately to that ceiling.

The new regime replaces earlier mechanisms, including the dólar blend, which had allowed exporters to convert a portion of their foreign earnings at a more favourable rate. Authorities said the changes are aimed at improving reserve accumulation and aligning the official rate more closely with market conditions.

A monthly one percent crawling peg — a mechanism that adjusts the floor and ceiling of the band gradually over time — will operate within the new range.

Depending on where the currency stabilises within the band, the shift could amount to an appreciation of nearly 30 percent compared to previous benchmarks.

The Central Bank will have access to US$28.1 billion in funding to support the transition, including IMF disbursements, a Chinese swap line, and repo operations with international banks.

Officials say the changes are intended to support macroeconomic stabilisation and to create conditions for increased foreign currency inflows.

– TIMES/NA