In order to "defend" its overvalued currency, Argentina in 2002 had to reduce its

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In order to defend its overvalued currency, Argentina had to reduce its holdings of foreign reserves. This is because the overvalued currency puts pressure on the country's foreign reserves, as it becomes expensive for other countries to buy the currency. By reducing its foreign reserves, Argentina can limit the supply of its currency in the foreign exchange market and prevent further appreciation. Reducing interest rates or tax levels would not directly address the issue of an overvalued currency, and reducing balance of payments surpluses would likely exacerbate the problem by increasing the supply of the currency in the market.

In Order to "Defend" Its Overvalued Currency, Argentina in 2002