Argentine peso posts worst month since Milei’s 2023 devaluation

Argentina’s peso tumbled on Thursday, capping the worst month since President Javier Milei devalued it in 2023 amid rising demand for dollars just as supply from agricultural exports dries up. 

The peso dropped more than 4.4 percent, the worst performer in emerging markets. It has tanked by more than 12 percent in July, the worst monthly decline since Milei devalued it after taking office in December 2023. 

The government has been building up international reserves in July, pushing pesos into the economy, amid pressure to meet goals of its program with the International Monetary Fund. The market has also seen increased demand from the private sector as businesses seek cover in the greenback ahead of October midterm elections.

A Central Bank report shows dollar purchases rising in June by more than US$800 million to total around US$4 billion, with the number of Argentines buying foreign currency almost doubling the amount of those selling it. 

The move comes at a moment of tight supply of foreign currency in the country, with agriculture exports dropping sharply in recent weeks. The current rate of 1,368 pesos per dollar is now closer to the upper level of the country’s managed floating exchange system, set at 1,451.06 pesos per dollar.

“The government needs to choose between further ARS depreciation, which can put pressure on inflation ahead of the election, or a further cooling of activity,” analysts at StoneX wrote in a note on Thursday.