In July peso fell more than 12%, the largest monthly drop since Milei devalued it in December 2023. Argentina’s peso experienced a significant decline on Thursday, marking the most challenging month since President Javier Milei implemented its devaluation in 2023. This downturn coincides with an increasing demand for dollars, juxtaposed with a diminishing supply from agricultural exports.
The peso experienced a decline exceeding 4.4 percent, marking it as the weakest performer among emerging markets. In July, it experienced a decline exceeding 12 percent, marking the most significant monthly drop since Milei implemented the devaluation following his assumption of office in December 2023.
In July, the government has been augmenting its international reserves, injecting pesos into the economy, in response to the pressures of fulfilling the objectives of its program with the International Monetary Fund. The market has experienced heightened demand from the private sector as businesses turn to the greenback for protection in anticipation of the October midterm elections. A Central Bank report indicates that dollar purchases increased in June by over US$800 million, bringing the total to approximately US$4 billion. Notably, the number of Argentines acquiring foreign currency has nearly doubled compared to those selling it.
The action occurs amid a period characterized by constrained foreign currency availability within the nation, coinciding with a significant decline in agricultural exports in recent weeks. The prevailing exchange rate of 1,368 pesos per dollar approaches the upper threshold of the nation’s managed floating exchange regime, which is established at 1,451.06 pesos per dollar. Analysts at StoneX noted on Thursday that the government faces a decision between allowing further ARS depreciation, which could increase inflationary pressures ahead of the election, or opting for a continued cooling of economic activity.