Argentine Peso’ Anguish. As illustrated in the graph, the Argentine peso moved from its fixed exchange rate of Ps1.00/$ to over Ps2.00/$ in a matter of days in early January 2002. After a brief period of high volatility, the peso’s value appeared to settle down into a range varying between 2.0 and 2.5 pesos per dollar.

If you were forecasting the Argentine peso further into the future, to March 30, 2002, how would you use the information in the graphic—the value of the peso freely-floating in the weeks following devaluation—to forecast its future value?

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2.2 2.0 1.8 1.6 1.4 1.2 1.0 0.8 12/17/2001 12/19/2001 12/21/2001 Argentine pesos (ARG) 1.00 U.S. dollar (USD) Daily: Dec 17, 2001-Feb: 28, 2002 2.4 12/23/2001 12/25/2001 12/27/2001 12/29/2001 12/31/2001 1/2/2002 1/6/2002 1/8/2002 1/4/2002 1/10/2002 1/12/2002 1/14/2002 1/16/2002 1/18/2002 1/20/2002 1/22/2002 1/24/2002 1/26/2002 1/28/2002 1/30/2002 2/1/2002 2/3/2002 2/5/2002 2/7/2002 2/9/2002 2/11/2002 2/13/2002 2/15/2002 2/17/2002 2/19/2002 2/21/2002 2/23/2002 2/25/2002 2/27/2002