The Argentine peso ended a five-day decline as major financial institutions engaged in the local currency market, coinciding with efforts by the United States government to support its ally Javier Milei in anticipation of an important vote this weekend. Both JPMorgan Chase & Co and Citigroup Inc were engaged in Argentina’s spot market on Wednesday, according to sources familiar with the situation. The peso, having experienced a decline over five consecutive sessions, concluded at a strength of 1,489 per US dollar, reflecting a 0.1 percent increase—just two pesos shy of the lower boundary of its trading band. Traders estimate that the US Treasury executed sales ranging from US$400 million to US$500 million, marking what they identify as its most significant intervention to date. No official figures have been disclosed. JP Morgan and Citi refrained from providing comments, and the US Treasury did not promptly respond to emailed inquiries. Milei and US Treasury Secretary Scott Bessent are attempting to prevent a currency run with only days remaining before Sunday’s congressional midterm election, a pivotal moment that could influence the future of the libertarian leader’s market-oriented reforms. The peso approached the limits of its trading band on Tuesday as Argentines turned to hard currency in anticipation of the upcoming vote, prompting the Central Bank to intervene to support it for the first time in approximately a month, with the US Treasury also taking action. The market is expected to experience continued pressure due to the constrained supply of dollars from commercial sources, as sellers “wait for the result of the election to see what happens, if this was all just noise and it ends, fading away, or what,” stated Juan Manuel Truffa.
Argentina’s dollar bonds experienced a decline across the curve, with notes maturing in 2035 decreasing nearly a cent to trade at 55 cents on the dollar, based on indicative pricing data. “It continues to feel like every time a small burst of buying from offshore funds comes in, the bonds get slapped down from supply coming from resident holders who are freaked out about the potential Black Swan on Sunday night,” Walter Stoeppelwerth noted in a report. Milei’s party aims to emerge from October 26 with enhanced backing in Congress, and he achieved a modest victory Wednesday afternoon when new data indicated that the economy experienced slight growth in August, notwithstanding a liquidity crunch. However, a significant loss in a recent provincial election unsettled markets and heightened concerns regarding the potential resurgence of the interventionist Peronist opposition in the upcoming 2027 presidential election. Following that vote, the administration of Donald Trump intervened. Bessent confirmed the signing of a US$20-billion swap line with Argentina on Tuesday, describing it as “a bridge to a better economic future for Argentina, not a bailout.” His attempts to secure equivalent private-sector funding for the crisis-prone nation, however, have not yet materialized as banks demand clarity on terms, structure, and collateral.
Juan Manuel Pazos noted in a report this week that utilizing the $20 billion swap line to defend Argentina’s currency “could quickly tip the scales unfavorably. Should the aim be to maintain the FX regime for an extended period, it is likely that a second $20 billion bailout from banks would be required.” Milei’s economy chief, Luis Caputo, reaffirmed in a post that there would be no alterations to foreign-exchange policy. The trading bands for the peso, instituted in April as a component of Argentina’s arrangement with the International Monetary Fund, are progressively perceived by investors as bolstering a currency that is overvalued. Market participants are closely monitoring prospective developments within Milei’s Cabinet. Argentine Foreign Minister Gerardo Werthein, a pivotal figure in negotiations with the United States, submitted his resignation on Tuesday evening. Political tension is escalating in the United States. In light of Elizabeth Warren’s critique regarding US expenditure amid the government shutdown, Bessent characterized the Trump administration’s initiative to support Argentina as “mission critical.”
The allocation of Treasury resources “provides targeted backing to a key ally that has pursued fiscally responsible policies and economic freedom,” he stated in a letter to Warren dated Tuesday. Argentine markets are exhibiting signs of fatigue in response to the continuous stream of social media communications from both US and Argentine officials, as noted by Joaquin Bagues. “At this moment, it operates on a pay-per-view basis,” he stated. “The market will engage when it possesses greater certainty.”