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Currencies
ARGENTINE PESO
Introduction | Overview | Structure | History | Factors affecting change in exchange rates | Daily trend of Argentine peso | Weekly trend of Argentine peso
Introduction


"Peso" is a Spanish word, meaning "weight" and is termed as a unit of currency in the current scenario. Peso is quite a dominant currency in the South American continent as it forms part of the national currencies of most of the countries in the continent such as Argentina, Chile, Colombia, Dominican Republic, Mexico, Uruguay and also Cuba and Philippines. Peso is used since the time as early as the colonial times when it referred to a Spanish coin, which was equivalent to 8 reales.

One of the most significant currencies amongst the above-mentioned peso dominated currencies is the Argentine peso. As the name suggests, the currency belongs to the country Argentina having ISO currency code ARS and numeric code 032. It was initially introduced as a convertible currency and was named "Nuevo peso argentine". "Centavos" act as the subunit of the Argentine peso and is often denoted with "$".

Overview


Argentine peso is a currency that has been making its way through hard struggle due to the frequent crises that had struck Argentina’s economy time and again. Contrastingly, peso was one of the most popular and highly traded currencies at one time. Among many economic crises that the country had been through, the toughest of them is said to be the one that struck in 1999 as the nation’s trade partner countries Mexico and Brazil were also into serious economic crisis. It led to the currency’s discontinuation of its peg to the US dollar and it was floated. Even floating the currency was not sufficient enough for the stabilization of its value and it depreciated to as low as about 80% of its value. The currency still maintains its exchange rate at around 4 pesos per dollar when before 2002 it was equivalent to the value of the dollar.

Currently, Argentine peso is trying to recover though the country still maintains a high inflation rate. The central bank has been provided the responsibility to preserve the value of the currency and protect the functions of the money. The government of Argentina also imposes currency import and export restrictions that have been changed since 2001 due to the economic crisis. The US dollars are widely accepted in Argentina with some of the provinces also issuing their own banknotes at par with peso.

Structure

Argentine peso is the legal tender in Argentina and its monetary unit is subdivided according to the decimal system, 1 peso = 100 centavos. Argentina’s reserve bank, Banco Central de la República Argentina, is responsible for the production of the currency notes and coins and the circulation of the currency in the country. The coinage in the currency is issued for smaller denominations of the currency i.e. for 7 denominations namely 5, 10, 25 and 50 centavos, 1 peso, 2 and 5 pesos. Coins from the lowest value i.e. 5 centavo up till 50-centavo bear the numerical denominations and the year in which the coins were minted on their reverse sides. The 1 peso coin has a core and a separate ring, the reverse side core depicting a 32 rayed sun and an inscription "PROVINCIAS DEL RÍO DE LA PLATA" meaning "River Plate provinces" and the outer ring showing the value of the coin in words and the year when it got minted. The 2 and 5 peso coins are almost similar in appearance possessing values and the year of minting on the reverse sides. The obverse sides of all the coins have inscriptions "EN UNIÓN Y LIBERTAD" meaning "in union and liberty" and "REPÚBLICA ARGENTINA" meaning "Argentine Republic" in common. Also, different coins show different engraved images on their obverse sides in addition that are mentioned below
  • 5-centavo coin - 32 rayed national sun
  • 10 centavos coin - national coat of arms

  • 25 centavos coin - Buenos Aires city hall

  • 50 centavos coin - the House of Tucumán.

  • 1 peso coin - replica of the first national coin depicting national coat of arms

  • 2 pesos coin - national coat of arms

  • 5 pesos coin - national coat of arms

Previously, 1-centavo coin was also accepted as the legal tender in the economy but now its circulation has been discontinued.

The banknotes are issued in 6 denominations that are 2, 5, 10, 20, 50 and 100 pesos. All of them are of same size and are differentiated through their color code and also the notes are made up of cotton paper. The front sides of the notes of different denominations bear different images pertaining to important people in the history of the country. The color code pattern in Argentine peso banknotes is mentioned in the following list

  • 2 pesos note - Light blue

  • 5 pesos note - Green

  • 10 pesos note - Brown

  • 20 pesos note - Red

  • 50 pesos note - Black

  • 100 pesos note - Violet

1 peso note was also into circulation until it was replaced by the 1 peso coin.

History


Peso was a currency of Spanish empire since the Spanish currency reforms in 1497. The country, with time, gained power and spread its area through acquiring colonies and states like other powerful European countries that resulted in making peso a world popular currency. the Spanish peso was adopted as the legal tender throughout its colonies, many of them were among the new world countries including Argentina. At that time, peso was known as the 8 reales coin.

In 1816, Argentina declared itself independent following the defeat of the Spanish king Fernando VII with the hands of Napoleon. Independent Argentina started to issue its own currency that was denominated in reales, soles and escudos. In 1826, two versions of Argentine peso were induced one of them being convertible and the other being unconvertible and were called "Peso Fuerte" and "Peso Moneda Corriente". These version of the currency operated till 1881 when the both of them were converted into a single currency i.e. "Peso Moneda Nacional". With this conversion, the currency was officially decimalized with the announcement of a fixed exchange rate that was 1 peso moneda nacional = 1 peso fuerte = 25 peso moneda corriente = 8 reales. Initially the coin for 1 unit of the new currency was made from silver known as patacon but the economic crisis in 1890 made sure that silver coin to be changed to any other metal. Also, paper currency that was convertible into gold termed as "peso oro sellado" was issued in 1881 but it had to be with drawn in 1929.

Peso moneda nacional remained the currency of the country till 1969 and in 1970 it was taken over by a new version of peso i.e. "Peso ley", the conversion rate being 1 peso ley = 100 peso moneda nacional. In 1983, the political system of Argentina was transformed into a democratic framework and that resulted in the introduction of a new peso currency "Peso Argentino" @ 1 peso argentino = 10000 peso ley. But soon after in 1985, it was replaced yet again by a new currency "Austral" as it itself lost its value drastically. Austral replaced peso argentino @ 1 austral = 1000 pesos. During the short life span of the austral, it suffered from hyperinflation, that resulted in steep rise of prices even up to 200% in a month and constant downfall of the value of currency. in 1992, with the election of the new president, the value of austral was stabilized and peso convertible was made the national currency of the Argentina. It was directly pegged to the US dollar @ 1 peso = 1 US dollar. Unluckily the country was again struck with an economic crisis in 1999 and it resulted in the abandonment of the fixed exchange rate system and since then, Argentine peso float its way and the value of the currency is derived from the market situations.

Factors affecting the exchange rates between two countries


The volatility in the foreign exchange rates depends upon a numerous macro economic factors that have different degrees of importance to different economies of the world. Some special and exceptional factors affecting the rates may also exist in the case of different countries. Following are shown the common factors on which the foreign exchange rate depends

  • Flow of imports and exports between the countries
  • Flow of capital between the countries
  • Relative inflation rates
  • Fluctuation limits on exchange rate imposed by the governments of the countries
  • Merchandise trade balance
  • Rate of inflation in the country
  • Flow of funds between the countries for the payment of stock and bond purchases
  • Relative growth
  • Short term and long term interest rate differentials
  • Cost of borrowings
 
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