Government intervenes in currency market to curb volatility

Argentina's government announced Tuesday that it will intervene in the currency market in an attempt to slow the accelerated depreciation of the peso in recent days.

The decision to intervene through the Treasury marks a shift in the exchange rate policy of President Javier Milei's government and comes just days before Sunday’s legislative elections in Buenos Aires Province, the country’s largest district, which is governed by the opposition Peronist party.

It also comes on the back of a scandal over alleged bribes implicating Karina Milei, the sister of the head of state and his presidential chief-of-staff.

In recent days, a growing demand for dollars in Argentina pushed the exchange rate close to the upper limit of the official floating band of 1,467 pesos per dollar — the threshold at which the Central Bank is authorised to step in.

The government’s policy of raising benchmark interest rates has not curbed the rush to offload pesos and seek refuge in the dollar. It comes amid  a climate of uncertainty fuelled by the approach of the nationwide midterm legislative elections in October 26.

The currency turbulence coincides with a judicial investigation into alleged corruption and the overpricing of medicines at ANDIS national disability agency, a case in which Karina Milei has been implicated. 

Fluctuations remain a highly sensitive issue for Argentines looking to protect their savings through foreign currency. The government is determined to prevent a weakening peso from fuelling inflation.

Controlling inflation has been one of Milei's central goals since taking office. Consumer prices have risen 17.3 percent so far this year, compared with 87 percent over the same period in 2024. 

Finance Secretary Pablo Quirno said in a post on X that the Treasury’s intervention in the free exchange market is aimed at “contributing to its liquidity and normal functioning.”

After nearly reaching 1,400 pesos per dollar on Monday, the exchange rate fell to 1,375 on Tuesday following the announcement, a decline of nearly one percent.

– TIMES/AFP