The US Treasury intervenes in the currency market in Argentina

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The US Treasury has intervened in the Argentine currency market for the first time, as the Trump administration tries to help its ally, President Javier Miley, contain the stampede on the peso.

Treasury Secretary Scott Pisent said the foundation “purchased the Argentine peso directly” on Thursday to boost the currency, after Argentine authorities quickly exhausted their own reserves in recent weeks. Since 1996, the United States had intervened in currency markets only three times before Thursday’s move, according to the bank. Federal Reserve Bank of New York.

The highly unusual US intervention comes as Miley, President Donald Trump’s most important ideological partner in Latin America, faces a crisis of confidence ahead of the October 26 midterm elections.

Picent added that the United States has “finalized a $20 billion currency swap framework” with the Argentine central bank. He said the success of Miley’s free market reform program was “systemically important”.

“Argentina “It is facing a moment of severe liquidity shortages,” Bessant said. “The US Treasury is prepared, immediately, to take any justified exceptional measures to provide stability to the markets.”

The peso has been under intense pressure since last month when Miley’s government fell into a political crisis and investors began to doubt the sustainability of the exchange rate policy, which has kept the peso strong in order to curb inflation.

Argentina’s dollar bonds jumped after the news, with the 10-year bond yield – which moves inversely with the price – falling to 11.47 percent, its lowest level since September. The Argentine peso rose 0.6 percent, reaching its strongest level in a week.

Shortly after Picente’s announcement, Argentine Economy Minister Luis Caputo thanked the US Treasury Secretary, expressing his “deepest gratitude for your unwavering support for Argentina.” “Your steadfast commitment has been amazing,” he posted on X.

Milley sought to keep the peso within fixed exchange rate bands and prevent it from falling sharply before crucial elections at the end of the month.

Local economists estimate that the Argentine Treasury has almost exhausted its liquid dollar reserves by selling $1.8 billion in the past seven sessions to keep the peso away from the lower bounds of the range.

International investors in Argentina’s dollar bonds feared that the country would burn through much of its reserves before this month’s elections if it did not receive US support.

The central bank has about $13 billion remaining from an IMF loan, which it can sell on currency markets when the peso reaches the lower end of the range under the terms of a bailout offered by the Fund in April.

Picent said the exchange rate range “remains fit for purpose” and that “Argentina’s policies are sound when they are based on fiscal discipline.”

Several independent economists said the ranges currently overvalue the peso, and before the U.S. announcement, local dollar futures prices indicated a significant depreciation of the peso after the election.

Among the most famous loans provided by the US Exchange Stabilization Fund, an emergency fund administered by the US Treasury, was $20 billion to support Mexico weeks after its currency collapsed in December 1994. The country withdrew $12 billion and paid the United States a profit.

The European Stability Fund’s last high-level direct intervention in the currency market was part of US and G7 efforts to sell the yen in 2011 after the Japanese earthquake that year.

Caputo held four days of talks with Treasury Department officials this week. Miley is scheduled to meet Trump at the White House on October 14.

Additional reporting by Joseph Cottrell in London