Argentina’s Treasury said it would intervene in the currency market as the nation’s assets sink amid a series of political and economic setbacks for President Javier Milei ahead of a key vote on Sunday.
The decision — a reversal from a government that repeatedly celebrated the peso floating freely within established bands — follows weeks of efforts to stabilise the battered exchange rate. Authorities jacked up interest rates to roll over more public debt, repeatedly raised reserve requirements and increased FX restrictions on banks.
Finance Secretary Pablo Quirno said on his X account Tuesday that the Treasury will participate in the FX market to contribute to its “liquidity and normal functioning.”
Sovereign notes tumbled across the curve, with securities maturing in 2035 down by 1.6 cents on the dollar to trade at the lowest since April, according to indicative pricing data compiled by Bloomberg. The currency was down 1.6 percent, trimming earlier losses of as much as 2.8 percent compared to Friday’s close as trading resumed in earnest after the US holiday drained liquidity on Monday.
The government has struggled to ease pressure on the currency as it fights off corruption allegations ahead a regional election in Buenos Aires Province on September 7. A bribery scandal involving Milei’s sister, Karina Milei, is raising concerns about the president’s image, with a judge blocking journalists on Monday from releasing damaging audio recordings following a complaint by the administration.
The recent blow up “is an example of the fragility of investor confidence even after just over 18-months of the Milei Presidency,” Walter Stoeppelwerth, chief investment officer at local brokerage Grit Capital Group, wrote in a report on Tuesday. “Most investors are viewing this election cycle as a referendum on President Milei’s performance in the first two years of his term.”
Another setback Milei’s administration came from the local election in Corrientes Province on Sunday, in which the government-backed candidate finished in fourth place. The underperformance confirmed fears that Milei’s strategy of competing in local elections without forming alliances has the potential to backfire.
Now, attention is turning to Sunday’s vote in Buenos Aires Province, which makes up nearly 40 percent of the country’s population and has consistently voted for the opposition Peronist movement. It’s being seen by investors as a key signal of what’s to come in October, when all of Argentina heads to the polls to renew a large chunk of Congress.
Strategists at Morgan Stanley consider elections “a near-term hurdle for the economy, reforms and market” but still see attractive valuations as continued reform momentum doesn’t seem priced in.
by Nicole Shapiro & Ignacio Oliviera Doll, Bloomberg
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