Peso's January Blues Unlikely To Last

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Since Christmas last year the Argentine peso has shown a rather surprising amount of short-term weakness. After hitting ARS3.0512/US$ on December 22, the decline began four days later with a 0.6% daily depreciation, and has continued in this direction, reaching ARS3.1100/US$ during yesterday's trading, the lowest rate since Spring 2003. Interestingly, the currency weakness has come at a time when headline indicators suggest a healthy economic climate. GDP growth measured 8.5% y-o-y in the first 11 months of the year, the full-2006 trade surplus expanded over 6% to hit US$12.41bn, and end-year CPI fell into single figures (9.8%) for the