Milei’s Treasury set to snap up large dollar sales in Argentina

Argentina’s Treasury is moving to scoop up large amounts of foreign currency in block trades just as US$7 billion from grain exports enters the market, according to three people with direct knowledge of the matter.

Central bank officials have contacted the trading desks at major financial institutions on behalf of the Treasury, asking to be notified whenever a client posts a sizeable dollar-sale order, the people said, requesting anonymity to discuss private conversations with Argentine officials. 

The Treasury aims to buy those dollars directly from sellers to prevent large inflows from strengthening the peso excessively, the people added, with one of them confirming they made sales to the Treasury on Thursday.

The Central Bank declined to comment and the Economy Ministry didn’t immediately respond to a request.

Argentina’s currency market has been flooded by dollars from grain exporters rushing to take advantage of a temporary tax holiday. President Javier Milei announced Monday that he would exempt such exports from duties in a bid to shore up the peso as investors fled the country after the ruling party suffered a crushing election defeat. 

By Wednesday night, Argentina said a US$7-billion cap set by the government for tax-free exports had been reached. To qualify for the relief, 90 percent of proceeds must to be sold into the market within 72 hours. That volume, in a market that usually trades about US$500 million a day, could sharply strengthen the peso.

While boosting reserves has long been a demand from the International Monetary Fund, Milei had so far prioritised keeping the currency strong to contain inflation.

The peso, which hit a record low of 1,475 per dollar last Friday, has since rebounded more than nine percent. Devaluation bets dropped sharply after Donald Trump’s administration said it is discussing a US$20-billion swap line with Argentina. After three sessions of solid gains, the peso was little changed Thursday, closing at 1,337 per dollar.

The government carried out similar block-trade purchases in June and July but was later forced to unwind them. It sold the dollars it had accumulated in the sessions leading up to the legislative election in Buenos Aires Province, in which Milei’s libertarian party suffered a harsh setback.