Milei’s government sells dollars as peso starts to sink again

Argentina’s peso is coming under attack again, forcing the government to intervene to keep it from plunging just days after a show of US support had propped up the country’s financial markets.

The currency fell more than six percent Tuesday, its biggest intraday drop since September 8, before the government sold dollars in the spot market. It closed 1.4 percent lower at 1,380.0 pesos per dollar. It’s not clear how much President Javier Milei’s administration sold. The Central Bank declined to comment and the Economy Ministry didn’t reply to a request for information.

The second day of losses mark a sharp turnaround for the currency, which had gained more than 10 percent after USTreasury Secretary Scott Bessent announced plans for a US$20-billion financial lifeline. A temporary export tax break had also brought US$7 billion into the country in a matter of days, fuelling the rally, while the government resumed some capital controls that had been lifted in April. None of that was enough to prevent the peso from resuming its drop this week.

“If the government has to sell on a day like today, when there is strong supply, it is natural that the market will interpret it negatively,” said Santiago Resico, an economist at brokerage firm one618.

Milei’s administration had used the brief period of relief last week to purchase dollars and build its reserves. But it still struggled to contain increasing demand for greenbacks, fueled by concerns over the president’s political support ahead of midterm congressional elections next month – particularly after a heavy defeat in the Buenos Aires Province local vote earlier in September – and the lack of clarity around the future of his FX policy.

The lack of details on the US financial lifeline is also weighing on assets. Argentina announced that Milei, who just returned from the US last week, will meet with US President Donald Trump again on October 14 at the White House.

Argentine dollar notes due in 2035 fell more than 1.8 cents on the dollar Tuesday to around 53 cents, one of the worst performers in emerging markets. The bonds are down for a fourth straight session, their longest losing streak in two months.

Investors are also worried about the growing gap between the official and the parallel exchange rates after it reached the widest since April, showing pressure from the government’s restrictions on dollar demand.

The show of support by the US appeased the market, but it “doesn’t solve the imbalances or the trends in the currency,” said Alejandro Cuadrado, an FX strategist at BBVA in New York. “The medium-term trend will remain upward and there will be a lot of post-election focus on the dynamics and next steps given that this regime is seen as temporary.”

Earlier Tuesday, Milei gave assets a brief lift by offering more details about the US deal in a television interview. In his first media appearance since Bessent’s announcement, the Argentine president said his government would keep its currency swap line with China even as it negotiates a financial rescue package with Washington. Milei also said Argentina has secured financing through the end of next year and signalled he would shuffle his Cabinet after the October 26 midterm vote.