Despite three interventions by the United States, the Argentine peso still hit a new low.

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Despite several interventions by the US Treasury, the Argentine peso's decline has not stopped. Instead, it has fallen to a record low.

On Monday, October 20, the Argentine peso fell nearly 1% against the US dollar, hitting an all-time low and approaching the lower end of the trading band set by the country in April. This decline occurred after the US Treasury had stepped into the market several times to buy pesos since October 9, as well as after the announcement by the two countries of a $20 billion currency swap arrangement.

The core driving force behind the market turmoil is investors' deep concerns about the key midterm legislative election results on October 26. Analysts point out that the support measures led by US Treasury Secretary Bassent have failed to ease the demand from Argentine investors to buy US dollars in large amounts as a hedge against an unfavorable election outcome.

Limited Effectiveness of US Intervention

To support the peso, the Trump administration has taken a series of actions this month. According to Argentine economists, since October 9, the US Treasury has intervened in the market three times, purchasing a total of about $400 million worth of pesos, although neither government has confirmed this figure. In addition, both parties have also announced a $20 billion currency swap arrangement.

Earlier this month, Bassent said in a televised interview that the peso was "undervalued" and he intended to "buy low and sell high."

According to a Wallstreetcn article, the US is even considering, through private arrangements with international banks, doubling the size of the initial $20 billion swap rescue plan to $40 billion.

However, confidence in the peso in the Argentine market has collapsed. Investors and ordinary people are exchanging pesos for US dollars on a large scale, betting that the peso will depreciate sharply after the election.

Election Uncertainty Overshadows External Support

The market turmoil began last month, when Argentine President Milei's party suffered a defeat in a key local election.

Now, investors are closely watching the upcoming midterm election, worried that Milei may be unable to gain enough support to promote his reform agenda. This political uncertainty has directly translated into a sell-off of the national currency.

"Market demand for US dollars has been very strong and will continue until the election results are released and exchange rate policy becomes clearer," said Salvador Vitelli, head of research at Argentine economic consultancy Romano Group.

Pressure on Foreign Exchange Reserves, Rising Devaluation Expectations

Adding to the market panic is Argentina's increasingly depleted foreign currency reserves. According to Romano Group data, after deducting liabilities, Argentina's monetary authorities hold less than $5 billion in reserves.

The low level of reserves has led investors to worry that the Milei government may be forced to abandon the current exchange rate band after the election, allowing a sharp peso depreciation.

This expectation of devaluation is especially apparent in the offshore market. The price of contracts known as Non-Deliverable Forwards (NDFs) indicates that the market is pricing in an accelerated devaluation of the peso beyond the official trading band.

The price of two-month forward contracts on Monday implies that the peso may fall below 1600 against the dollar by then.

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