Argentina's peso dives after currency controls lifted

Argentina's peso has lost about 30% of its value after the country lifted currency controls.

The drop comes after Argentine Finance Minister Alfonso Prat-Gay said he would eliminate the foreign exchange restrictions that have propped up the peso since 2011.

After his announcement, markets opened with one dollar buying 14 pesos.

Analysts had predicted a fall of up to 30% from the previous controlled rate of 9.8 pesos to the dollar.

They said they expect it could fall to 14.5 pesos to the dollar. That is the rate at which the currency has been trading on the black market.

Market watch

Argentine Finance Minister Alfonso Prat-Gay said that the country's central bank had been given the right to buy pesos if the exchange rate fell too rapidly.

But he said the restrictions needed to be removed to improve the country's ailing economy. Exchange controls would end for all businesses, who would be allowed to buy as many dollars as they needed.

But ordinary Argentines would still face restrictions on the amount of dollars they could buy a month.

Shop owners said consumers could cut spending in the short term as they see their purchasing power reduced, especially when it comes to dollar-denominated imports.

The previous government of Cristina Fernandez de Kirchner tried to end the buying of dollars four years ago, but prohibition simply fuelled the black economy.

Since then, informal street sellers in Buenos Aires offer foreign currency at much higher rates than the official one.

Argentines also found other creative ways to circumvent restrictions, from organised day-trips to neighbouring Uruguay to get US dollars from cash machines to Bitcoin trading.

The new policy may satisfy middle and upper-class Argentines who will now be able to get their dollars freely.

But they are also fearful of the consequences: higher prices and a potential devaluation of their currency.