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The Argentine peso has fallen below the level it reached before the US Treasury began purchases earlier this month, in a sign that the Trump administration’s financial support is failing to halt the currency’s slide ahead of a crucial election for libertarian president Javier Milei.
The peso dropped almost 1 per cent in early trading on Monday to 1,476 against the dollar, touching a fresh record intraday low, before paring its losses. The level is close to the bottom of an exchange rate band adopted in April.
The slide has resumed despite three purchases of pesos by the US Treasury since October 9 — which Argentine economists estimate total roughly $400mn, although neither government has confirmed the figure — as well as the announcement of a $20bn currency swap line between the two countries.
Argentina’s central bank confirmed the signing of the swap agreement on Monday. Terms of the deal were not disclosed.
Milei’s pro-business government has struggled to end severe market turmoil that began last month after it suffered defeat in key local elections. Analysts say US support, led by Treasury secretary Scott Bessent, has failed to quell demand for dollars from Argentine investors who are hedging against the possibility of a bad result for Milei at critical midterm legislative elections on October 26.
Investors are concerned that Milei may be forced to devalue the peso from its exchange rate band after the vote as the central bank’s hard currency reserves run low. The monetary authority has less than $5bn in reserves excluding liabilities, according to Argentine economic consultancy Romano Group.
“The market’s demand for dollars has been very strong and is going to continue that way until we have the election results and more clarity on the exchange rate,” said Salvador Vitelli, Romano’s head of research.
Offshore bets on the future path of the peso, known as non-deliverable forwards, have been pricing in accelerated depreciation in the currency outside Argentina’s official band.
Bessent said in a television interview earlier this month that the peso was “undervalued” and that he intended to “buy low and sell high”.
Pricing for two-month forwards on Monday implied that the peso could weaken below 1,600 to the dollar by then.
Dollar-denominated Argentine government bonds strengthened slightly on Monday. But they remain well below the prices hit immediately after the initial US intervention to prop up Argentina’s currency was announced.
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