Reuters Econ World Currency as a lifeline
Nov 19, 2025
Karin Strohecker, Reuters' chief emerging markets correspondent, dives into Argentina's currency challenges under Javier Milei. She explains the role of currency bands in fighting inflation while discussing Milei's economic overhaul. Karin highlights the impact of U.S. support on the peso and its geopolitical implications. With insights into the risks of fixed exchange rates, dollarization debates, and the social consequences of fiscal cuts, she paints a vivid picture of Argentina’s complex financial landscape.
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How Currency Bands Work
- A currency band keeps a currency within a corridor between a free float and a full peg to provide stability.
- Governments use reserves, interest rates, and interventions to enforce the band and manage expectations.
The Hidden Risk Of Defending Bands
- Currency bands require substantial reserves and can collapse spectacularly if defenders run out of firepower.
- The Asian financial crisis showed pegs mask vulnerabilities and can trigger sharp, damaging devaluations.
Argentina’s Dire Economic Inheritance
- Argentina entered 2024 with inflation above 200% and stagnant growth near 1% per year.
- Javier Milei promised radical fiscal cuts and stopped money printing to tackle that hyperinflationary legacy.