Currency crisis worsens and Argentina has only US$700 million in Treasury reserves, say traders.

247 - The currency crisis in Argentina has intensified again. According to a report by Valor Econômico Published this Tuesday (7), the Argentine Treasury would be practically out of dollars, with only about US$ 700 million remaining in its accounts, according to estimates from market operators. To try to contain the devaluation of the peso, the government of President Javier Milei has been promoting a series of interventions in the exchange market, which have already consumed more than US$ 1,5 billion in just six days of operations.

On Tuesday, the Treasury sold dollars for the sixth consecutive session, with estimated spending between $250 million and $330 million. The action had a limited effect, keeping the peso virtually stable, but at the cost of a significant depletion of already scarce US dollar reserves.

Central Bank limitations and pressure from the IMF

The Central Bank of Argentina still holds approximately US$10 billion in international reserves, according to private estimates. However, the agreement signed with the International Monetary Fund (IMF) prevents the use of these reserves for direct interventions, except when the peso's exchange rate exceeds the authorized fluctuation band—which, on Tuesday, ranged between 943 and 1.484 pesos per dollar.

Last month, the Central Bank had already sold US$1,1 billion to try to contain volatility. Now, the strategy has been centralized in the Treasury, which carries out the operations without officially disclosing the daily amounts. This lack of transparency amplifies the climate of uncertainty and fuels speculation in the financial market.

Government seeks support from the United States.

With its coffers collapsing and debt repayment deadlines looming, Milei is trying to secure a financial aid package from Washington. U.S. Treasury Secretary Scott Bessent stated that he is in contact with Economy Minister Luis Caputo, who traveled to Washington along with the Central Bank president, Santiago Bausili, to negotiate possible emergency support.

To date, the size and timeline of this package remain undefined. The Argentine government hopes that a positive signal from the United States — under the leadership of President Donald Trump — could ease pressure on the exchange rate and calm investors.

Weight melts away on the black market.

Despite the restrictive measures adopted in recent weeks, such as the 90-day ban on reselling dollars and the increase in sales of foreign exchange futures contracts, demand for the US currency has not decreased. The parallel market rate is already over 1.500 pesos per dollar, while the official exchange rate stands at 1.429,5 pesos.

Pricing of futures contracts indicates that the market expects a devaluation of up to 60% in the next 12 months — a sign of distrust in the economic policies of the Milei government. Furthermore, the country needs to pay US$500 million in debt maturing in November, which worsens the fiscal situation.
Elections and political tension

The crisis occurs amidst the campaign for the midterm legislative elections, scheduled for October 26th. Milei is trying to recover political ground after a resounding defeat in a provincial vote last month. Meanwhile, Argentine government bonds continue to fall: dollar-denominated bonds maturing in 2035 have dropped almost a cent, trading at around 56 cents per dollar, according to Bloomberg data.

The depletion of reserves, the instability of the peso, and political uncertainty create a scenario of high vulnerability for the Argentine government. The desperate search for international support exposes the failure of the dollarization and radical fiscal adjustment policies, pillars of Javier Milei's economic program.