Argentine markets fall as investors’ unease grows amid currency tensions

By Walter Bianchi BUENOS AIRES, Oct 1 (Reuters) – Argentina's financial market on Wednesday retreated for the third straight day amid persistent investor distrust, with many seeking to convert their holdings into dollars ahead of upcoming mid-term legislative elections. The interbank peso weakened 3.16%, closing at 1,425 per dollar. Bonds fell sharply by an average of 2.1% in over-the-counter trading, while the S&P Merval stock index fell by 0.5%. Traders estimated that a selling position for dollars at 1,425 pesos in the electronic market represents a ceiling imposed by the Treasury through its own currency sales, as authorities intervene to cap the peso's slide by supplying dollars at that level. "With the dollar near its upper band, the current scheme looks increasingly unsustainable post-election. The main concern remains debt payments, while official FX interventions add to instability," said Wise Capital. In an effort to calm the currency market, the government reimposed restrictions to curb speculative bond trades and limited foreign currency purchases to banks and authorized institutions. It also opened a temporary tax-free window for grain exporters, prompting liquidations of around $7 billion aimed at strengthening central bank (BCRA) reserves. As of Tuesday, the Argentine central bank had bought about $2.1 billion in dollars from those exporters, the SBS Group estimated. The latest market slide comes despite growing signs of U.S. backing for President Javier Milei. The Trump administration is in talks over a potential $20 billion swap line with Argentina's central bank, and has signaled it stands ready to do what is needed to support the South American nation. The effort, initially seen as a vote of confidence in Milei's economic program, is now being reassessed by investors as signs of strain re-emerge in local markets. A planned meeting later this month between Trump and Milei is being closely watched by markets for further signals of alignment between the two leaders. "The priority will be to navigate the period leading up to the elections with as little volatility as possible, so we do not anticipate major changes in economic or currency policy before then," said Capital Markets Argentina. Argentina's battered peso will likely weaken slightly more after the upcoming October 26 mid-term election, but it is not expected to undergo another major devaluation, according to a Reuters poll of financial analysts. Meanwhile, on the informal "blue" market, the peso weakened to 1,460. (Reporting by Walter Bianchi; Editing by Alistair Bell)

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