Argentine Peso Surges After Midterm Elections

The Argentine peso weakened past 1,450 per US dollar and slid back toward its record low of 1,475 from September 19th after a brief recovery as political and policy uncertainty ahead of the October 26th midterms collided with doubts over the size and immediacy of US support, triggering heavy FX outflows, a repricing of devaluation risk and a rush into forward protection.

Markets initially cheered talk of a $20 billion swap framework but the deal’s opaque timing and activation conditions, mixed public comments from Washington and a high-profile warning that US help could be contingent on the election outcome undermined that confidence.

Even after limited Treasury peso purchases, the official exchange rate and short-dated forwards moved sharply lower, reflecting banks’ and corporates’ hedging and funding stress.

Against a fragile reserve position and large near-term external obligations, traders have instead priced a higher chance of a post-election policy shift.

The Argentine peso weakened past 1,400 per US dollar and slipped back toward its record low of 1,475 on September 19th after a brief recovery.

A US backed $20 billion swap line and bond purchase pledge briefly sparked a roughly 10% rally in mid September, but the boost faded as nearly $6 billion of farm export dollars flooded the market while the Treasury bought only about $2.2 billion.

Traders exploited the gap with “rulito” round trips that may be draining roughly $2 billion a month, forcing the central bank and Treasury to burn about $1.1 billion of reserves in days and step up spot and futures sales to defend the band.

Reimposed controls and clampdowns on digital wallets widened the official to parallel spread above 10% and pushed the blue rate past ARS 1,500.

With roughly $10 billion of IMF related financing needed in H1 of 2026 and durable external support still unclear, the peso remains exposed to further depreciation as fiscal and political risks continue to sap reserves.

The Argentine peso strengthened to about 1,350 per US dollar, rebounding from a record low of 1,475 on September 19th after a package of external assurances, fiscal measures and stepped up market intervention reduced dollar demand.

US Treasury Secretary Scott Bessent said they stand ready to consider swap lines, direct dollar purchases and other tools to support Argentina, which helped trigger a rally in the peso and in sovereign bonds.

Buenos Aires also temporarily suspended export taxes on key agricultural products through the end of October or until a specified exchange rate threshold is reached.

The central bank and the treasury intervened in the spot market and used reserve management to smooth liquidity spikes at the top of the trading band, limiting forced selling.

Market pricing reflected a reduction in tail risk as international actors signalled willingness to back Argentina while short covering and a retreat from panic selling restored two way flows in local markets.

?The Argentine peso weakened to around 1,200 per US dollar, following President Javier Milei's abrupt removal of long-standing capital and currency controls.

This policy shift, enabled by a new $20 billion loan from the IMF—including an immediate $12 billion disbursement—aims to stabilize the economy by allowing the peso to float within a managed band of 1,000 to 1,400 per USD. While intended to attract foreign investment and boost exports by eliminating market distortions, the sudden transition has introduced volatility.

The peso experienced a 10% drop on the first day of the new regime, reflecting market adjustments to the removal of artificial exchange rate supports.

Although the IMF loan bolsters central bank reserves, providing a buffer against further depreciation, the currency's stability now hinges on investor confidence in the government's broader economic reforms. The narrowing gap between official and black market exchange rates suggests a move toward normalization.