I was looking at the historical exchange rates of the Argentine Peso(ARS) to United States Dollar(USD).
Why did the exchange rate flatten out in August 2023?
Source from Forbes, other charts are similar.
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9A flat line, or plateau, is always from artificial pegging. One has pegged to the other, or both have pegged to something else.– user26460Oct 24 at 1:35
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6@user26460: Rule of thumb: The USD has not been pegged to anything, or you would've heard about it (it would be international news). In this case, that just leaves the ARS being pegged to the USD.– KevinOct 24 at 15:47
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3@Kevin Yes, of course, but currencies being pegged to others is not that unusual in general. If you view crypto as currency then this is even more true. If we were looking at a chart of ARS to PAB (Panama, pegged to USD) we'd see a similar chart form.– user26460Oct 24 at 17:13
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2 Answers
To complement Freiheit's answer, with a more straightforward view. From the point of view of a non-Argentinean person, if you purchase something valued ARS350 with your credit card, you will be charged USD1. Meanwhile, if you walk the streets in Buenos Aires they will happily give you ARS1050 for a USD1 bill (strictly, they would usually only exchange USD100 bills, but the rate is the above as of today Oct 25, 2023).
So if you visit Argentina the smart way is to bring cash in US dollars and exchange them in the street. Which is particularly cumbersome because nowadays the highest bill in Argentina is ARS2000; yes, two dollars. So when you exchange USD100 you will be given at least fifty bills (most likely one hundred, as ARS1000 notes are way more common than ARS2000 notes).
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1Great advice, which overlaps well at travel.stackexchange.com. What's official and what locals do is often different.– user26460Oct 25 at 15:00
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1@JoL: no, but the last 1000 was supposed to be 2000. Thanks for noticing! Oct 25 at 20:41
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@MartinArgerami am I wrong in thinking that holding a $100 in "the streets" would, therefore, be someone dangerous? Additionally, why not just carry ones and twos (that is, US $1 bills and US $2 bills) and pay for the stuff that people living there would normally use those ARS1000 and ARS2000 notes for, like instead of using a credit card and being charged $1, hand them a $1 bill and take 2 or 3 times as much stuff.. Maybe the better question is "why would they usually only change USD100 bills?" - Is that specific to money changers, or do you mean the everyday folk too?– CfomodzOct 25 at 21:44
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It's specific to money changers. They will sometimes exchange smallers bills but at a worse rate. As for exchanging with regular people, it's not that simple for several reasons. First, people has at least some access to an intermediate exchange rate (if you satisfy some conditions, you can buy up to USD200/month at the bank at a rate of around ARS750). Second, it's complicated to exchange, and the people at a shop are often employees without that decision power; and, as I mentioned, small bills cannot be exchanged for ARS at the good rate, you might lose between 10% and 20%. Oct 25 at 21:51
After years of this, the government finally devalued the peso the day after the presidential primaries, taking the official rate to AR$350 to the dollar. The government plans to hold this level until November.
"This government has used a policy called “crawling peg” to manage the exchange rate. While pegging a currency to the dollar means setting a fixed exchange rate, the crawling peg means the currency is systematically and gradually devalued by a tiny amount, at a rate set by the government."
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1After years of what!? - I am going to click the link and read it, but still.. it seems an odd place to end the copy-paste– CfomodzOct 25 at 21:46
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4"This government has used a policy called “crawling peg” to manage the exchange rate. While pegging a currency to the dollar means setting a fixed exchange rate, the crawling peg means the currency is systematically and gradually devalued by a tiny amount, at a rate set by the government." is the missing bit, at least according to my assertion that it's needed to understand the other bit.– CfomodzOct 25 at 21:47