Argentina’s Treasury is burning through its dollar deposits to prop up the peso, with traders estimating it has as little as US$700 million left in its coffers.
On Tuesday, President Javier Milei’s administration sold dollars for a sixth straight session. It’s estimated to have spent between US$250 million and US$330 million to leave the peso almost unchanged on the day. That brings the total amount sold over the past six sessions to at least US$1.5 billion.
The Central Bank also has dollars it can deploy – roughly US$10 billion, according to private estimates – but it faces more restrictions in doing so. Under its accord with the International Monetary Fund, the monetary authority can’t tap its own reserves unless the peso breaches a floating band that on Tuesday ranged from 943 to 1,484 per US dollar. The bank stepped in three times last month, selling US$1.1 billion, but officials have been relying on Treasury cash to keep the peso stable lately.
Argentina’s Treasury doesn’t officially disclose its dollar sales.
Authorities in the crisis-prone nation are now racing against the clock to get aid from Washington. US Treasury Secretary Scott Bessent has pledged a financial lifeline and said he would hold talks with Economy Minister Luis Caputo, who has traveled to Washington with Central Bank chief Santiago Bausili. The timing and size of any aid package remain unclear.
In the meantime, policy tightening and new capital controls have failed to cool demand for dollars. Even after the government reinstated some restrictions – including a 90-day ban on reselling dollars – and ramped up sales of FX futures, the gap between the parallel and official exchange rates has widened. The street rate is now beyond 1,500 pesos to the dollar, compared with 1,429.5 peso in the official market.
Futures pricing implies a depreciation of as much as 60 percent annual in the next 12 months, far above inflation expectations.
The currency crisis comes as Argentine authorities prepare to repay US$500 million of debt coming due in November. Bonds are under strain as Milei’s government heads into crucial national midterm elections on October 26 after suffering a landslide defeat in a provincial vote last month.
Dollar bonds were down across the curve on Tuesday, with notes maturing in 2035 falling almost a cent to trade at around 56 cents on the dollar, according to indicative pricing data compiled by Bloomberg.
by Ignacio Olivera Doll, Bloomberg
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