The Argentine peso continued its freefall as traders focused on the upcoming elections in the country and interventions by Donald Trump and his administration.
The USD/ARS exchange rate was trading at 1,500 for the first time ever. It has now jumped by 45% this year making the peso the worst-performing currency.
Argentina election and US bailout
The USD/ARS pair has surged in the past few days even as the US government continued its interventions. Data shows that the US Treasury sold dollars through Banco Santander, although the full amount was not made public.
The US has also intervened in other ways, including signing a $20 billion currency swap line and is in talks with American banks to lend a similar amount, a move that many banks are resisting. In a statement, Scott Bessent, the Treasury Secretary, said:
“Argentina now has the opportunity to embrace economic freedom, and our stabilization agreement is a bridge to a better economic future for Argentina, not a bailout.”
The Argentine peso has crashed despite these efforts for three main reasons. First, there is a likelihood that Milei’s party will lose in the upcoming mid-term elections, as it did in a recent one in Buenos Aires. Trump is expected to stop all aid if the party loses, while Milei’s reforms will face heightened scrutiny.
Second, analysts believe that the announced bailout will not be enough as the country needs more dollars in the economy. Analysts believe that the ideal figure should be north of $60 billion.
READ MORE: Explaining Argentina’s market crash and the hard path ahead for its economy
Third, Donald Trump is facing substantial pressure from lawmakers for the bailout. Some of his closest allies, like Marjory Taylor Green, have blasted the measure, especially now that the government shutdown is continuing.
I’m hearing the same sentiment in my district. “We love President Trump, please tell him to stop helping foreign countries and put Americans first.” At this point, help Americans only!
A Bloomberg analyst said:
“We suspect the swap’s formalization paves the way for the Argentine government to step back in as needed, allowing the US Treasury to stop or moderate its intervention amid widespread domestic criticism of the operation.”
One reason for the criticism is that the huge bet by the US has a limited room to pay off. Besides, the country has a long history of defaults that have cost investors billions. It had a $100 billion sovereign default in 2001 and another one during the pandemic.
The Argentine peso has also slipped because of the ongoing US dollar rally. Data shows that the dollar index has jumped from a low of $96 to almost $100 today. It has jumped against most developed and emerging market currencies.
USD/ARS technical analysis
The daily chart shows that the USD to ARS pair has been in a strong uptrend in the past few months. It has moved above the important resistance level at 1,475, the highest point in September.
The pair has remained above all moving averages, a sign that bulls are in control. It has also moved above the Supertrend indicator, a sign that bulls are in control.
Therefore, the pair will likely continue rising as bulls target the key resistance at 1,500. A move above that level will point to more gains, potentially to the psychological point at 1.600.
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