Argentine peso plunges to a new record low

Argentine peso has been under pressure for the last few months amid increasing concerns over economic crises in developing nations. The currency has fallen almost 100% against US dollar since beginning of 2018 and 13.91% on 30^th August 2018, highest depreciation in one day. This is the most severe drop since Argentina lifted control on the currency in 2015. As the global economy regained its footing after the 2008-09 recession, the rising interest rate in the US by the Federal Reserve and recent US president foreign and economic policy are playing major roles in the depreciation of currencies of emerging markets such as India, Brazil, Turkey and South Africa. So far this year, currencies of these countries have been on a general downtrend as concerns over the investment flows grew. In fact, these countries have witnessed a reversal of foreign investments this year as easy money in developed countries is drying up amid reversal in ultra easy monetary policy.

The central bank of Argentina, BCRA, responded in quick time to restore confidence in the plunging peso. The central bank raised the cost of borrowing by 15 percentage point to 60%, the highest in the world.