The US Treasury finalised a US$20 billion (RM84.45 billion) currency swap framework with Argentina and bought pesos in the open market on Thursday, making good on US President Donald Trump’s pledge to prop up the wobbling country and sending the peso and Argentine dollar bonds sharply higher.
“The US Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets,” US Treasury Secretary Scott Bessent said in announcing the actions on X.
Argentina’s 2035 bond rose 4.5 cents to trade at 60.5 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 rose 5.3% Thursday. Last month they touched a 2025 low, days before Bessent’s initial support pledge. Argentine stocks traded in US exchanges rallied 13%.
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 (IMF), which has a US$20 billion loan programme with Argentina.
IMF managing director Kristalina Georgieva applauded the US’ move in a post on X, saying the IMF was “fully aligned in support of the country’s strong economic programme, anchored on fiscal discipline and a robust FX regime to facilitate reserve accumulation”.
A US Treasury spokesperson declined to provide any further details, including on the amount of pesos purchased and how the US$20 billion currency swap line would be structured.
Bessent had previously pledged support for Argentina from the Treasury’s US$221 billion Exchange Stabilization Fund (ESF), and its majority holdings of IMF reserve assets known as Special Drawing Rights.
The backstop is partly aimed at giving Milei’s party a boost in Argentina’s Oct 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 in the midterms.
Although the effect on financial markets was immediate, there was no guarantee the US backstop will improve Milei’s party’s election prospects as public dissent over his austerity measures has grown.
Source: Theedgemalaysia