The US Treasury signed off on a $20 billion currency swap deal with Argentina. When President Donald Trump promised support for the beleaguered South American nation, it started buying pesos in the open market on Thursday.

The announcement sent the Argentine peso and dollar-denominated bonds soaring, providing relief to the Latin American country’s tumultuous markets.

“The US Treasury is prepared, immediately, to take whatever exceptional measures are warranted to provide stability to markets,” Treasury Secretary Scott Bessent said in a statement on X announcing the measures.

The dollar rose only 0.8% to ARS 1,418 after an initial 3% up, while Argentina’s 2035 bond rose 4.5 cents to 60.5 cents (dollar value). Local stocks skyrocketed 5.3 per cent, while Argentine shares in New York climbed 13 per cent.

The announcement concluded four days of discussions in Washington involving Bessent and Argentina’s Finance Minister Luis Caputo, along with officials from the International Monetary Fund that has a $20 billion loan program with Buenos Aires.

The US action to delink from the ongoing IMF discussions and arrangements to restore macroeconomic stability, boost productivity, and restore fiscal order was lauded by none other than the IMF Managing Director, Kristalina Georgieva.

The Fund was “fully aligned in support of the country’s strong economic program, anchored on fiscal discipline and a strong FX regime to facilitate reserve accumulation,” and Georgieva went on to applaud the delinking in her quarterly briefing to the media.

Treasury silent on details, denies bailout

According to Reuters, a Treasury spokesman refused to explain how the swap line would work or the quantity of pesos purchased.

Bessent had earlier pledged that the Treasury positive factors of $221 billion from the Exchange Stabilization Fund (ESF) and its with the $42 billion of so-called Special Drawing Rights (FSR) from the IMF could identical to fund through the Treasury for the backing of Argentina.

In an appearance later that day on Fox News’ The Ingraham Angle, Bessent called the deal anything but a bailout.

He claimed, “No money was sent to Buenos Aires, and the ESF has never lost money; it is not going to lose money here.”

The move also aligned with US strategic goals partly due to President Javier Milei’s pledges to curb Chinese access to Argentina while making its rare earths and uranium sectors available to US companies, he said.

Political stakes ahead of midterms

The intervention comes just weeks before Argentina’s October 26 midterm elections, where Milei’s party is seeking to extend its minority position in Congress.

Support from the Treasury is viewed as an attempt to help his government buy itself fiscal space and political capital as it seeks to implement radical spending cuts and a market-driven agenda.

But lawmakers have been trying to curtail Milei’s ability to rule by decree, making the vote more consequential.

Analysts say financial help for corporate America may not pay off in votes, with the public increasingly fed up with austerity, although markets were pleased.

UBS strategist Shamaila Khan said the US move could provide a boost to Milei, and Gramercy analyst Kathryn Exum called the midterms “the next major event for the economy” and said “the election would lead to major policy and FX adjustments thereafter.”

Bessent described Milei’s policies with “systemic importance” to the United States, claiming they might contribute to a more peaceful and wealthy Western Hemisphere.

Reactions from Buenos Aires and Washington

Milei, who is scheduled to meet Trump next week during the annual meetings of the IMF and World Bank in Washington, thanked the ex-president Mikely, who is set to meet with Trump next week during the IMF and World Bank annual meetings in Washington.

Investors welcomed the intervention. Markets had been “hungry for details” on Bessent’s earlier pledge, said Eduardo Ordonez Bueso, a portfolio manager of emerging markets debt at BankInvest.

He said, “We would be discussing an absolute crash of Argentina if they had not come through with a promise they made.”

However, the political fallout in Washington was quick. Several Senate Democrats submitted legislation to prohibit the use of the ESF for international rescues, calling the move a waste of US cash.

“It is inexplicable that President Trump is propping up a foreign government while he shuts down our own,” Senator Elizabeth Warren remarked, alluding to the ongoing partial shutdown.

Market relief, lingering risks

The US backstop provided immediate relief to Argentina’s markets, but its longevity is doubtful.

As Milei pursues his austerity and reform program, the currency swap might serve as a short-term stabiliser—or another temporary fix for a country long plagued by economic volatility.

For the time being, Washington’s bet on Argentina reflects a newfound geopolitical and financial alignment, one that links Milei’s experiment in market radicalism to the larger goals of a Trump-led US administration.

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