According to analysts at Bank of America, the Argentinian Peso, currently one of the weakest currencies globally, is predicted to experience further depreciation.
These experts foresee the exchange rate dropping to 545 against the dollar by year’s end and plummeting to 1,193 by 2024’s end.
They anticipate the upcoming presidential election winner will push for further devaluation starting in December.
Recently, the government adjusted the Peso’s value by 18% to 350, following an unexpected outcome in a pivotal primary election.
This political twist saw assets decline, predominantly due to a strong performance by candidate Javier Milei, an advocate for dollarizing the economy and eliminating the central bank.
The foreign exchange market is likely to face ongoing challenges, say analysts like Sebastian Rondeau, Jane Brauer, and David Hauner.
Among the reasons cited are increasing political uncertainty, inflation concerns ahead of the October general elections, drought effects on exports, and negative foreign reserves.
The depreciation has led residents, lacking official market access to dollars, to resort to parallel market purchases in Buenos Aires streets.
Consequently, this unofficial rate surged above 700, as reported by “dolarhoy.”
BofA strategists believe the devaluation is generally a positive step, given the Peso’s significant overvaluation.
They feel the present government’s move takes on some of the burdens of necessary macroeconomic adjustments.
This shift might bode well for a pending US$7.5 billion loan disbursement from the IMF, they suggest.
However, they also caution about added inflationary pressure.
Despite the situation, Argentinian bonds, already under strain, saw a marked drop in emerging markets post this decision.
Yet, Bank of America retains an above-market-average recommendation for the debt, recognizing a clear mandate for economic policy shifts.