By Jorge Otaola
BUENOS AIRES (Reuters) – Argentina’s central bank on Friday made its largest daily dollar sale in nearly six years as it continued to use reserves to support the local currency, meeting strong dollar demand from institutional investors wary of political instability.
The bank’s latest intervention totaled $678 million, its largest for a single day since October 2019, bringing the amount sold in the last three sessions to $1.1 billion.
The bank has been seeking to manage liquidity at the top of its floating exchange-rate band, and Argentina’s economy chief vowed to keep using the monetary authority’s reserves as the local peso hovers at historic lows.
“We’re going to sell every last dollar (of the central bank’s reserves) at the top of the band,” Economy Minister Luis Caputo said on Thursday night during a livestreamed interview.
The deteriorating market backdrop underscores deepening investor skepticism ahead of pivotal midterm elections in October that could strip libertarian President Javier Milei of crucial congressional support for his reform agenda.
On Friday, the wholesale peso settled stable at 1,475 per dollar after the central bank’s moves, near the band’s ceiling.
In the informal “blue” market, however, the Argentine currency slipped to an all-time low of 1,520 per greenback, weakening more than 6% in the week.
The central bank had not made an intervention since mid-April, after a $20 billion International Monetary Fund deal that initially loosened foreign-exchange curbs.
“Given that this pace of dollar sales by the central bank would imply a loss of reserves of approximately $10 billion before the elections – approximately 70% of the funds already disbursed by the IMF – the likelihood of abandoning the exchange-rate band scheme before the October 26 elections increases,” BancTrust & Co said.
While the central bank’s international reserves stand at $39.26 billion, analysts say provisional official data indicates that net foreign exchange reserves for intervention are estimated at just $6 billion.
Continued dollar sales, experts warn, risk accelerating reserve depletion, jeopardizing near-term debt payments and triggering a rise in bond issuance to bridge funding gaps.
Caputo affirmed the current exchange rate framework and said the Treasury is working to ensure January debt payments, promising to provide clarity to bondholders once finalized.
Argentina’s country risk – a measure of investor confidence – reached its highest level since August 2024, hovering around 1,500 basis points, while over-the-counter bonds fell 1.4% on average. They were down 9.2% in the week.
Buenos Aires’ main stock index closed down 0.7% on Friday.
Argentines vote in October to renew part of the lower house and Senate, amid uncertainty over how the government will recover from setbacks in Buenos Aires province in recent contests.
(Reporting by Jorge Otaola in Buenos Aires; Writing by Natalia Siniawski and Gabriel Araujo; Editing by Richard Chang and Matthew Lewis)
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