Trump Administration’s Unprecedented FX Move in Argentina Raises Eyebrows

The Trump administration has carried out the first-ever unilateral U.S. government intervention in the foreign exchange market to support an emerging market currency — and the country in question is Argentina, long known for its economic volatility.

According to officials, the U.S. Treasury sold an undisclosed amount of U.S. dollars for Argentine pesos on October 9, followed by two additional rounds of peso purchases on October 15 and 16. The moves were part of a broader U.S. support package aimed at stabilizing Argentina’s troubled economy and shaky financial markets.

While the U.S. has a long history of providing financial assistance to emerging economies — notably to Mexico in the 1990s — it has almost always done so through credit lines, loans, or currency swap arrangements, not through direct foreign exchange intervention. This marks a striking departure.

Since the end of the Bretton Woods fixed exchange rate system half a century ago, the Treasury has never officially deployed taxpayer dollars to unilaterally purchase a foreign currency — least of all one as volatile as the Argentine peso.

A risky and unusual move

The decision did not stem from deep economic ties. Last year, bilateral trade between the U.S. and Argentina totaled only $26 billion, barely 0.35% of America’s global $7.3 trillion trade. For comparison, trade with Brazil was nearly five times higher.

Some analysts speculate the move may reflect a strategic counterweight to China’s growing influence in Latin America. Argentina holds vast deposits of lithium, copper, and possibly rare earth minerals. Supporting the peso — and establishing a $20 billion swap line — could help curb Beijing’s leverage in the region.

Still, political motives appear to be just as strong. President Donald Trump has openly backed Argentina’s libertarian and controversial leader Javier Milei, and many see the intervention as a show of political support rather than sound economic policy.

Last week, Trump said bluntly, “If Milei’s party doesn’t win the October 26 midterm elections, we won’t waste our time with Argentina.” Treasury Secretary Scott Besant later clarified that U.S. financial support would continue “as long as Milei’s government pursues good policies,” regardless of election results.

However, Brad Setser, senior fellow at the Council on Foreign Relations, warned that direct peso purchases are “extraordinarily risky.”

“This seems less about helping a struggling economy fix its structural problems — low reserves and an overvalued currency — and more about rewarding ideological allies and expanding the group of Latin leaders aligned with Washington,” Setser said.

Peso devaluation — a matter of when, not if

Argentina’s macroeconomic fundamentals remain fragile. The country still owes the IMF around $57 billion, and since its record 2001 default, it has defaulted twice more.

Since taking office in 2023, Milei has slashed public spending, deregulated markets, and pushed privatization. Inflation has fallen from 200% to 32%, but the peso remains under intense pressure. The currency currently trades within a controlled band against the dollar — one many economists believe is unsustainable.

Allowing the peso to float freely would likely cause a short-term inflation spike but could eventually boost exports, widen the trade surplus, and help rebuild foreign reserves.

Besant maintains that the peso is undervalued, but most market participants disagree. Despite Washington’s intervention, the currency sank to a record low of 1,476 per dollar on Monday. For many, the question now is not if a devaluation will occur, but when.

If the crawling band is dismantled, U.S. Treasury support might be the peso’s only immediate lifeline — though analysts doubt it can hold without deeper reforms.

While Washington has long used the dollar as a tool of foreign policy, direct FX intervention marks an entirely new tactic — one that investors warn could expose U.S. taxpayers to significant losses and set a volatile precedent.