Dollar Rises in Argentina, Challenging Carry Trade and Prompting Intervention

Argentina's dollar has begun to climb, testing one of the year's most profitable strategies: the carry trade. In June, the wholesale official exchange rate rose 4.9%, closing the week at 1477 pesos. This marked the first monthly loss for those who had bet on holding pesos, such as through fixed-term deposits, since the Buenos Aires province elections in 2025.

The Central Bank (BCRA) continued buying foreign currency, albeit at a slower pace than in previous weeks. Operators and private consultants noted increased use of tools like futures and exchange rate-linked bonds to moderate pressure on the dollar. For Javier Milei's government, the dollar's movement is a sensitive economic variable, influencing expectations and import costs, with the potential to fuel inflation if the trend persists.

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The wind has changed in the currency market.

However, the currency adjustment remains limited. The official dollar has only advanced 1.4% in 2026, significantly below the 14.7% inflation accumulated by May. It also remains nearly unchanged from a year ago. According to GMA Capital, the exchange rate is still about 18% below the upper limit of the currency band, suggesting the recent rise is a correction within the current framework rather than a regime break.

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All indications are that the government is willing to sacrifice low rates for currency stability.

The dollar's increase erased two months of carry trade gains, resulting in the strategy's first monthly loss since September 2025, a period marked by electoral uncertainty. "The wind has changed in the currency market," summarized Econviews, noting the nearly 5% rise in June ended over five months of stability. The consultancy called it the government's first real test since initiating its reserve accumulation program and adopting a more expansionary monetary policy.

Econviews reported that the economic team intensified intervention in futures and dollar-linked bonds to curb currency pressure. This has led to reduced liquidity in the peso market and rising interest rates. "All indications are that the government is willing to sacrifice low rates for currency stability," the consultancy concluded. GMA Capital highlighted that the carry trade "evaporated two months of dollar gains," accumulating a 2.5% loss in June, the first since September 2025's electoral volatility. That year, following financial and political backing from Donald Trump, the ruling party won the national legislative elections.

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evaporated two months of dollar gains