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Yesterday the informal or “blue” dollar hit 2015 highs, peaking at 15.30 ARS/USD and closing at 15.05.

This represents an increase of ARS 0.54 cents, following an increase of ARS 0.30 cents on Monday. The lie official rate has remained unchanged at 9.18 ARS/USD, which puts the gap between the official rate and informal street rate around 64.5 percent. So while we still haven’t reached last September’s peak of 15.67 ARS/USD, we’re getting close and we’re doing so surprisingly quickly.

The “blue chip swap”, or contado con liquidación (CCL) operation using bonds to move funds also went up ARS 0.09 to reach 13.67 ARS/USD.

Why is the peso falling so quickly, and why now?

The explanations are pretty weak. It’s an election year, but we knew that last week. Opposition leader Mauricio Macri’s chances of winning the upcoming presidential election are looking bleaker by the day, but again that’s hardly earth shattering news. Poll-leading FPV candidate Daniel Scioli’s running mate Carlos Zannini puts the K in Kirchnierism, but we knew that too.

Macri’s political protege Horacio Rodríguez Larreta just barely squeaked out a win as mayor of Buenos Aires over the weekend, which may have prompted people to dollarize their pesos, putting pressure on the system and inducing the currency equivalent of a feeding frenzy.

Regardless, the blue dollar rates around 15 ARS/USD are the same rates we saw a year ago. To bring the blue rate down, the government has consistently intervened heavily in two forms:

  1. It shrunk the market by prohibiting imports and external payments,
  2. It effectively flooded the street with physical bills by allowing workers to purchase dollars from banks, knowing this cash would end up exchanged for pesos in unofficial currency exchange houses known as cuevas.

These measures are still in place and the rate is again inching upwards. The Central Bank has taken steps to try to get the situation under control by requesting additional audits and information from banks, exchange houses, and finance houses, but incomplete information is really not the issue at hand. The Central Bank’s superintendent of financial entities German Feldman has also fined the following institutions this month:

  • Transcambio Foreign Exchange House: ARS $7 million
  • Eves Tourism House: ARS $2.15 million
  • Rombo Compañía Financiera: ARS $1.9 million
  • Banco Cetelem: ARS $640,000
  • Construcom: ARS $600,000
  • Percy: ARS $240,000

The Argentine peso is on shaky ground, and has been for some time. Most people believe the government can make it till the end of the year without it exploding, but another word for belief is simply faith. If faith erodes, the peso will keep falling because at the end of the day the government doesn’t have enough dollars to hold it up.

The most unsettling part of this whole fiasco is not the peso falling in value – that’s inevitable save a drastic change in government policy. What’s upsetting is that Argentine financial newspaper Ambito Financiero is referring to the “blue” dollar as the illegal dollar (like the government does,) and that people exchanging pesos for dollars are in fact masterminding a speculative currency attack to take advantage of the elections and use it as a tool to sow anxiety and woe.

Speculative attacks by definition involve actors entering a market in order to exit and make gains when some event occurs. So for this to be a speculative attack, the buyers of dollars would have to be hoarding them, ready to pounce and buy back pesos when the price falls. Put another way, to be engineering a speculative attack on the peso, these buyers would have to be attempting to destabilize the peso market in the hopes of making tremendous financial gains when they again sell their dollars back for many more pesos than they originally bought them for. Based on my in-depth study of Argentines in their natural habitat, I’m fairly certain such a complex and well-coordinated plan is not currently afoot.

And so while I hope to have assuaged your fear that the peso is under speculative attack, I for one will sleep less soundly knowing that a once-respected financial newspaper uses “blue” and “illegal” interchangeably and hasn’t quite captured the meaning of “speculative attack”.