tl;dr
The U.S. intervenes in Argentina's currency crisis with a $20B swap, but analysts question if it can stop the peso's freefall amid political turmoil and investor panic ahead of key elections.
**U.S. Intervenes in Argentina’s Currency Crisis as Peso Tumbles Amid Political Uncertainty**
In a dramatic move to stabilize Argentina’s faltering economy, Citigroup sold a massive batch of Argentine pesos to the U.S. Federal Reserve on Thursday, marking a pivotal step in Treasury Secretary Scott Bessent’s emergency plan to prevent further collapse. The transaction, part of a $20 billion swap line between the U.S. and Argentina, aims to curb the peso’s sharp decline and forestall a political crisis ahead of the country’s midterm elections on October 26.
The Federal Reserve acted as an intermediary for the U.S. Treasury, facilitating the sale amid a broader effort to absorb excessive demand for dollars. Major banks, including JPMorgan Chase, Goldman Sachs, and Bank of America, are reportedly negotiating short-term loans to Argentina, secured by domestic assets. Meanwhile, Banco Santander SA has been purchasing pesos on the local market to support the effort. None of the involved institutions or the Treasury have publicly commented on the operations.
The peso’s turmoil has been exacerbated by investor panic, with the currency hitting a midday low of 1,424 pesos per U.S. dollar before recovering slightly to around 1,410–1,400. Traders speculate that the U.S. intervention provided temporary relief, but skepticism lingers. Many Argentines doubt that even the $20 billion package will halt the currency’s downward spiral, given the scale of the crisis.
President Donald Trump has added to the uncertainty, claiming the peso is “undervalued” and hinting at a potential $40 billion expansion of the rescue plan through private bank deals. However, his threat to cut U.S. support if Milei’s party loses the midterms has rattled markets. Investors fear that a setback for Milei’s libertarian reforms—a cornerstone of Argentina’s economic strategy—could trigger a rush to flee the peso.
Analysts remain skeptical of the Treasury’s efforts. Ezequiel Asensio, a portfolio manager at Valiant Asset Management, noted that Bessent’s interventions have “diminishing marginal returns,” with each measure sparking only fleeting market rallies. Lucio Arrocha, a StoneX strategist, warned that a devaluation is “inevitable,” arguing that Argentina lacks sufficient dollars to withstand capital flight.
The situation has drawn comparisons to 1992, when Bessent, then a young trader under George Soros, helped orchestrate the UK’s exit from the European Exchange Rate Mechanism. Now, Bessent is on the opposite side, attempting to prevent a collapse rather than profit from one. Javier Timerman, a financial analyst, called the parallel a “warning shot,” highlighting widespread belief that Argentina’s exchange rate must adjust to reflect reality.
Despite the U.S. intervention, the peso remains overvalued relative to inflation, which has surged to 12% since April. The official exchange rate now mirrors the black-market rate from before recent currency controls were eased, underscoring the disconnect between policy and market reality. Meanwhile, Argentina’s financial system is under strain: loan costs have exceeded 100%, and the government is rolling over less than half of its maturing peso debt.
Former finance secretary Miguel Kiguel cautioned that the current measures are unsustainable. “People still think the intervention lasts until the election,” he said, “but after that, no one knows how it continues.” As Argentina approaches the polls, the fragile balance between U.S. support and domestic economic forces remains a precarious tightrope walk.
With markets divided between hope and despair, the outcome of the midterms could determine whether the peso’s crisis deepens—or if a temporary reprieve is all that’s possible. For now, the U.S. effort underscores the global stakes of Argentina’s economic turmoil, even as skepticism about its success persists.