In the past few days, the value of Argentine peso futures has decreased significantly as traders speculate on a possible faster depreciation of the struggling currency. This uncertainty stems from doubts surrounding the exchange rate regime in light of an upcoming agreement with the International Monetary Fund (IMF).

Following the announcement of a new $20 billion loan program between Argentina and the IMF on April 9, the April peso future contract has dropped from 1,125 to around 1,180 per dollar. Currency traders are now trying to anticipate the potential impact on the peso, which is currently managed by stringent capital controls and a gradual depreciation system known as a crawling peg.

Despite analysts foreseeing a potential devaluation, there is no consensus on the matter. The government has rejected the idea of a sudden devaluation, while President Javier Milei has advocated for the loosening of currency controls established in 2019.

The market is split on the future exchange rate policy, with some expecting a devaluation, others ruling it out, and some suggesting the establishment of a currency band to limit peso devaluation. This uncertainty, coupled with the anticipation of the IMF loan program approval, has led to a decline in peso futures prices, although they did show a slight recovery after a notable drop.

According to Argentina-based settlement and clearing agency Cohen, market sentiment hinges on the impending IMF agreement and decisions surrounding the exchange rate. The fluctuating dynamics in the global economy have also contributed to the rise in dollar futures contracts.