(Reuters) -The United States purchased Argentine pesos and finalized a $20 billion currency swap framework with Argentina’s central bank after a meeting between the two countries’ top finance officials in Washington this week, U.S. Treasury Secretary Scott Bessent said on Thursday.
The market for Argentine pesos was closed when the news came out but the peso strengthened right before trading stopped at 2:00 pm ET/1800 GMT and was last quoted at 1,418 per dollar. Argentine dollar bonds also rose sharply.
Argentina’s markets are closed on Friday.
COMMENTS:
MARC CHANDLER, CHIEF MARKET STRATEGIST, BANNOCKBURN CAPITAL MARKETS, NEW YORK
“We’re not just giving them dollars. we’re getting an asset in exchange for that. What we’re trying to do is give them enough money so it can stabilize the peso until after this month’s elections. And then after the elections, they’ll adjust policy. So we’re protecting somebody, not because the U.S. has a national security interest in Argentina. We’re helping them for ideological reasons, and we’re trying to influence the outcome of their election. The US is doing this to try to influence the election in Argentina, because the person that the Trump administration likes is under a lot of pressure now having lost a Buenos Aires municipal elections earlier last month.”
“It looks like it’s a relatively modest amount of money from the US Treasury’s point of view. I think the economic impact on the US is if we’re giving them dollars they’re giving us pesos and down the road we’re going to swap back. The way this is structured I’m afraid it might be a long time before we get the dollars back because the peso, by most people’s reckoning, is overvalued. The government does not want to let the peso sink .. if it would sink, it would make Argentine inflation go up.”
“What are they going to do with the money we give them? Part of it’s going to be used to buy back government bonds, but part of it, like the money that the IMF gave Argentina, could be used to try to support an overvalued currency. If you support an overvalued currency when the music’s over the peso is likely to be weaker than it is now, and that’s going to make it harder for them to pay us back the dollars they owe us.”
JUAN PEREZ, DIRECTOR OF TRADING, MONEX USA, WASHINGTON:
“It makes sense for the Argentinian peso to jump as it has after a currency swap of $20 billion to alleviate the financial crisis Argentina is going through. And this goes along with the U.S. administration’s policy of aiding those who are aligning with its agenda on trade, diplomacy, and other American interests. It seems some headlines are suggesting though that Argentina may not see a direct impact on the real economy. There are also doubts regarding the Argentine President Milei’s ability to get things accomplished regardless of the aid as his popularity and effectiveness seem to be waning.”
EDUARDO ORDONEZ BUESO, EMERGING MARKETS DEBT PORTFOLIO MANAGER, BANKINVEST
“If they hadn’t come through with a promise they made … we would be talking about a complete collapse of Argentina. When they first announced it markets rallied initially. But since then people were hungry for the details. We’re just waiting for all the little dotting of the I’s and crossing of the T’s to get all the final details for people to feel comfortable and calm and stop challenging the exchange rates.
“You can see less volatility every day and something more normal. The Argentinian authorities have been traveling to the U.S. the last few days, they much camped in Washington to finalize their conversations. So it’s been the only driver of the of the valuations the last few days.”
JIM CRAIGE, CO-CHIEF INVESTMENT OFFICER AND HEAD OF EMERGING MARKETS, STONE HARBOR INVESTMENT PARTNERS
“It matches pretty closely with expectations. I didn’t think the US Treasury would be directly buying pesos, but the peso is responding accordingly. (Bessent) said he was going to do something and do something significant, and they really have. All very positive from a pricing standpoint.”
(Compiled by the Global Finance & Markets Breaking News team)
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