U.S. Treasury Buys Argentine Pesos Again, Trump Conditions Support on Milei’s Victory
The Facts:
The U.S. Treasury announced a new intervention to help the Argentine government rein in the dollar-peso exchange rate amid a strong demand for the greenback.
On social media, U.S. Treasury Secretary Scott Bessent stated that the institution had purchased Argentine pesos in both blue-chip swap and spot markets.
He stated:
Treasury remains in close communication with Argentina’s economic team as they work to Make Argentina Great Again.
While he did not disclose the size of this intervention, he stated that the Treasury was “monitoring all markets,” highlighting that they had “the capacity to act with flexibility and with force to stabilize Argentina.”
According to local media, the move managed to contain the exchange rate to maintain it below the upper band that would force an intervention from Argentine authorities.
The intervention comes after President Donald Trump hinted at cutting this aid if Milei’s party loses the legislative elections to be held on October 26. “If he loses, we are not going to be generous with Argentina,” he declared.
Why It Is Important:
The will to support the Argentine economy after Milei’s party lost in the Buenos Aires election last month has helped the country bounce back from a dollar liquidity crisis.
Bessent’s announcement comes after the approval of a $20 billion currency swap deal, while another $20 billion in aid is still being discussed with banks and investment funds that would invest in the country’s debt.
Nonetheless, Trump’s statements on the conditionality of this arrangement have angered local politicians and analysts, who claim that they are part of the U.S.’s traditional political meddling in foreign affairs.
Looking Forward:
Even with the support of the U.S. Treasury, the dollar-peso exchange rate is expected to keep rising as Argentines traditionally have used the dollar in times of uncertainty, with the legislative elections coming close.
If the official dollar follows the behavior of other exchange rates, which overcame the upper band of the current flotation system on Friday, both the central bank and the national treasury would be forced to intervene, spending more of their scarce dollars to stabilize the internal market.
The size of a potential new intervention of the U.S. Treasury will be key to determining the behavior of the Argentine economy the following week.
FAQ 🧭
- What recent intervention did the U.S. Treasury announce regarding Argentina?
The U.S. Treasury has purchased Argentine pesos in blue-chip swap and spot markets to help stabilize the dollar-peso exchange rate amid high demand for dollars. - What did Treasury Secretary Scott Bessent say about the intervention?
Bessent stated that the Treasury is closely communicating with Argentina’s economic team and has the capacity to act flexibly and forcefully to stabilize the situation. - How has this intervention impacted Argentina’s currency situation?
The U.S. intervention has helped contain the exchange rate, preventing it from reaching the upper limit that would require Argentine government intervention. - What are the potential future implications of this U.S. support for Argentina?
Despite the U.S. support, experts predict the dollar-peso exchange rate may continue to rise as Argentines seek dollars during uncertain times, especially with upcoming legislative elections.
