Hello, Can anyone please provide any opinion about how I might go about hedging Fx risk on the Argentine Peso? Against the USD. Given the real risk of a 2024 default, I realize that this is a big ask... any advice is truly appreciated. Note: dropping this here instead of Forex because the question is about hedging, for which futures (or forwards) are the typical instrument. I thought that the commodity futures crowd might have more insight. Thanks, ET$CM
Tough one I know... Nobody wants to step into the line of fire of an almost certain Argentine default.
Professional writers like to write about the importance of hedging. Hedging is not necessary / required. So don't need to crack your head. If you buy ARS.USD (futures or spot), just make sure you have a SELL STOP (hard or soft). The whole purpose of hedging or having a STOP is to limit your loss.
In my experience, stops don't work very well when the 5#!7 hits the fan. The price plunges right past the stop, and you end up getting slaughtered. There's a pecking order to fills, and retail is last. First the quant funds in nanoseconds connected to the exchange by 12" of fiber; then the hedge funds in microseconds with cages at the exchanges, then the professionals in offices, then the semi-pros in milliseconds with a leased line, then the coin collectors, stamp collectors, and finally the retail trader. Argentina defaults, and any remaining liquidity will be gobbled up faster than the last bag of chips at Burning Man. We need a perfect hedge
That is the problem if you trade non-major, illiquid currency. Please continue looking for the perfect hedge.
Isn’t one of the candidates advocating to switching to a US dollar standard if he wins? What would be the play if you thought that was likely to happen?