Dollar in Pause: The Government proposes six weeks to take advantage of high rates before the October storm

The stabilization program and the consequences of defeat in the province

The defeat, which Milei publicly admitted as “clear” but without altering the economic course, exposes the vulnerabilities of a stabilization program that prioritized exchange containment at the expense of a deterioration in economic activity. To get to the elections, The government displayed an arsenal of monetary and fiscal tools aimed at maintaining the exchange rate at low levels, sacrificing growth. These measures include aggressive interventions in the dollar futures market, the validation of effective interest rates that triple the projected inflation, the mandatory for banks to renew treasure debt through an increase in lace and, in the week prior to the vote, a direct intervention in the spot to hold the wholesale dollar.

These actions, not very effective in the short term to stabilize the market, generated a high cost in terms of activity. On Monday after the electionthe wholesale dollar opened in 1,450 pesos, reaching 1,460 —To 9 pesos from the ceiling of the flotation band – before going back and closing at 1,409 pesos. On Tuesday, the closure was 1,416.50 pesos, without the need for BCRA intervention, since the upper limit was not tested. This initial behavior illustrates the immediate pressure on the official exchange rate, which rose 3.3% in the day, reaching 1,425 pesos in the retailer.

The exchange band scheme, implemented in April 2025 as part of the new agreement with the International Monetary Fund (IMF), allows a controlled flotation between a floor today of approximately 960 pesos and a roof of 1,470 pesos, with 1% monthly adjustments for both limits. Within this area, the BCRA intervenes indirectly to mitigate volatility, but must sell reservations if the wholesale dollar exceeds the roof, absorbing liquidity in pesos. The pre -election intervention of the Treasury was a calculated bet to a favorable result; However, with scarce deposits the defense capacity was temporarily known.

Despite this pressure, where the treasure has no capacity to contain the dollar at prices last Friday, The market perceives that the BCRA has sufficient funds to hold the band’s roof at least until October, Backed by IMF pending disbursements and other multilateral organisms. The political decision to maintain current bands, combined with this external capital injection, generates confidence that, before reaching the ceiling, a genuine offer of dollars by exporters and investors attracted by the high rates of real interest emerges.

The “impasse” until October and the panorama postelections

This scenario could grant the government an exchange “impasse” up to six weeks, prior to the national legislative elections of October 26. In this period, savers and investors have an opportunity to position themselves in fixed income instruments in pesos, such as fixed deadlines or bonds, capitalizing the high rates before an eventual return to the dollar as a refuge. However, This respite should not be underestimated: the week prior to the October elections could concentrate repressed demand, pressing the band’s roof “Then around 1,490 pesos, 5% above the current closure. At that time, the BCRA would be forced to intervene, selling reservations to defend the level.

Postoctubre, the panorama is complicated. The result of national elections will not only define the balance of powers, but also future economic projections. A llaf of Lla, similar to Buenos Aires, could further erode confidence in the adjustment program. The real economy cannot sustain current rates, this would imply a less attractiveness to Carry Trade and a BCRA – or treasure – that also, instead of selling, must buy dollars to fulfill external commitments.

With small net reserves, and a country risk that exceeded 1,000 basic points after provincial defeat, the band’s roof could be insufficient. The government, instead of a net seller of dollars, would become a buyer to honor debts, requiring a recalibration of the bands or a turn to a more “dirty” flotation.

In summary, the six -week impasse offers a tactical window for investors to take advantage of high rates before electoral uncertainty. However, October Deadline is imminent: an adverse result could shorten the band’s roof, forcing its recalibration. The Mileista government, which has prioritized disinflation on growth, must navigate this period with surgical precision. If you know how to capitalize it, you could stabilize the exchange front; Otherwise, the “summer” will become a prolonged storm, remembering that in emerging economies such as Argentina, politics and markets are intertwined inexorably.