As Argentine peso rallies, United States eyes a small gain on its rescue

US President Donald Trump said the United States made “a lot of money” by bailing out Argentina. 

Yet even as that country’s markets rallied back from the depths after Argentina President Javier Milei secured a surprisingly large victory in Sunday’s legislative elections, the reality looked decidedly more modest: by the close of trading Monday, the US Treasury was likely ahead by about one percent to two percent on its recent purchases of the peso, according to the timing of its buying and the market’s subsequent moves.

The US hasn’t disclosed the precise details of its unusual currency market interventions this month, when it started stepping in after global investors and local residents dumped the peso on speculation that voters would deliver a rebuke to Milei and his free-market economic agenda. 

But people with direct knowledge of the matter said it started on October 9 and has since totalled about US$2 billion. Based on when the Treasury was said to be buying – and the peso’s four percent advance on Monday, which pushed it back to the highest since October 16 – it appears that the US government has so far come out with a small profit, if the gains hold.

That potential return only takes account of the exchange rate between the peso and the US dollar. The actual return to the Treasury is likely higher because it has been depositing the pesos it acquires into an interest-bearing account at Argentina’s Central Bank, according to a person with direct knowledge.

A spokesperson for the US Treasury didn’t respond to a request for comment.

The estimates are only a snapshot in time, of course, and the United States could easily slip back into the hole if the sell-off resumes after Monday’s relief rally. Currency analysts have said the current exchange rate is artificially high and likely unsustainable over the long-term. Some have speculated that Milei was just waiting until after the election to expand the peso’s trading band to give it more room to weaken. 

“The ARS remains the missing piece of the policy puzzle,” said Alejandro Cuadrado, global head of foreign exchange Latin American strategy at BBVA, referring to the shorthand for the peso.  “The positive election results have provided much needed relief but will require some reassessment.”

by Ignacio Olivera Doll & Sebastian Boyd, Bloomberg