U.S. buys Argentine pesos, finalizes $20 billion currency swap

The U.S. government purchased Argentine pesos and finalized a $20 billion currency swap framework with Argentina’s central bank, Treasury Secretary Scott Bessent said on Thursday, sending the peso and Argentine dollar bonds sharply higher.

“The U.S. Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets,” Bessent said in a post on X.

Argentina’s 2035 bond rose 4.6 cents to trade at 60.58 cents on the dollar while the peso closed at 1,418 per dollar, up 0.8% on the day after falling 3% earlier. Local stocks, which touched a 2025 low days before Bessent’s initial support pledge last month, rose 5.3% Thursday.

Bessent issued his statement at the end of four days of meetings with Argentine Finance Minister Luis Caputo that also involved officials from the International Monetary Fund. In April, the IMF granted Argentina a new $20 billion loan program.

Bessent said Caputo had coordinated closely with the IMF on Argentina’s reform commitments, adding: “Argentina’s policies, when anchored on fiscal discipline, are sound. Its exchange rate band remains fit for purpose.”

A spokesperson for the IMF could not immediately be reached for comment on the U.S. actions.

“Argentina faces a moment of acute illiquidity,” Bessent said in his post. “The international community – including @IMFNews – is unified behind Argentina and its prudent fiscal strategy, but only the United States can act swiftly. And act we will. To that end, we directly purchased Argentine pesos.”

A U.S. Treasury spokesperson declined to provide any further details, including on the amount of pesos purchased and how the $20 billion currency swap line would be structured.

Backstop for Milei

Previously, Bessent had pledged the use of the Treasury’s $221 billion Exchange Stabilization Fund and its holdings of IMF reserve assets known as Special Drawing Rights to support Argentina.

The backstop is partly aimed at giving Argentina’s right wing president, Javier Milei, a boost in Argentina’s October 26 mid-term legislative elections. His party wants to strengthen its minority position to solidify his agenda to cut government spending and boost private-sector investment.

Argentine lawmakers are working to limit what the president can do via decrees, raising the stakes for Milei’s party performance in the midterms.

Bessent called the success of Milei’s reforms of “systemic importance,” to the U.S. by helping to anchor a prosperous Western Hemisphere.

Milei, who is scheduled to meet Trump next week during the IMF and World Bank annual meetings in Washington, thanked Bessent and President Donald Trump in a message on X.

“Together, as the closest of allies, we will make a hemisphere of economic freedom and prosperity. We will work hard every day to provide opportunity for our people,” Milei wrote.

Investors greeted the intervention with a sigh of relief.

Eduardo Ordonez Bueso, emerging markets debt portfolio manager at BankInvest, said markets had been hungry for details of Bessent’s support pledge and had been challenging peso valuations.

“If they hadn’t come through with a promise they made…we would be talking about a complete collapse of Argentina,” he said.

Jim Craige, co-chief investment officer for Stone Harbor Investment Partners, said he was surprised that the U.S. Treasury directly bought pesos, but welcomed the move. Bessent “said he was going to do something and do something significant, and they really have. All very positive from a pricing standpoint.”