The recent YPF ruling in New York against Argentina, along with a cautious report by the JP Morgan financial firm, and the upcoming mid-term elections sparked some noise in the country’s markets this week, with the peso weakening against the U.S. dollar.

Between Friday and Tuesday, the U.S. dollar exchange rate jumped from AR$1,204.6 to AR$1,237.3 — 3% in two days. Meanwhile, Argentine dollar-nominated bonds fell along with Argentine stocks traded on Wall Street through American Depositary Receipts (ADRs).

YPF’s ADR rose slightly on Tuesday after plunging sharply the day prior. Meanwhile, the country risk, as measured by JP Morgan, closed at 701 basis points.

On Monday, New York Judge Loretta Preska ordered Argentina to hand over shares of oil and gas giant YPF as a partial payment to the Burford Capital hedge fund, which won a US$16.1 billion lawsuit over the company’s 2012 nationalization. Preska gave Argentina two weeks to transfer its Class D shares to a global custody account at the Bank of New York Mellon.

After devaluing the peso by more than 50% in 2023, the Milei administration propped up the currency in a bid to contain inflation. However, this has quickly made Argentina become the most expensive country in Latin America and has negatively impacted the industry’s competitiveness.

Last week, an official report showed that in tourism alone, the country’s coffers are in a US$3.47 billion deficit in the first quarter of the year.

Questions about the sustainability of the economic plan have arisen all over the political spectrum, with particular concerns over the lack of international reserves and the US$5.2 billion foreign exchange deficit in the first quarter of 2025.

Doubts increase among investors

The JP Morgan report, titled “Argentina: Taking a breather,” suggested taking profits in long LECAPs. Although the financial institution remained “constructive on Argentina’s medium-term prospects given disinflation and fiscal progress,” it warned about potential issues — namely, the fact that “peak agricultural inflows” have past, likely continued tourism outflows, potential election noise, and the Argentine peso’s underperformance, which prompted the Central Bank to intervene in the foreign exchange market via derivatives.

“With positive seasonality close to an end and elections looming, we prefer to take a step back and wait for better entry levels to re-engage in bullish local markets trades,” the report said.

In April, the firm had recommended that investors participate in short-term carry trades in Argentina after the administration lifted several capital restrictions for individuals and companies. However, in last week’s report, they said that “recent developments warrant a more cautious approach in the near term.”

The report added that the peso underperformed “during some of the most favorable months in terms of seasonality, which saw agricultural inflows slightly exceeding the averages of the past decade.” They also pointed out that the government sold US$1.5 billion in the futures market, even though the currency had not reached the top of the band.

“We have been flagging that current account dynamics warranted attention, and in particular tourism outflows could remain a source of pressure, especially ahead of the winter break,” the report said. 

“In this context, we prefer to close our trade recommendation for the time being,” they concluded.

Gustavo Quintana, an analyst and broker for PR Corredores, told the Herald that the YPF ruling had more impact than the JP Morgan report.

“As soon as [the ruling] was known, the exchange market changed its trend and started a rise that continued today as well, taking the value of the dollar to its highest nominal value since the end of convertibility [2001],” he said. “Significant increases scare away sellers and attract buyers.”

Similarly, independent financial analyst Gustavo Ber argued that every headline in the last few days “generated more caution among investors,” even “within an external ambience of greater appetite for risk that led Wall Street to record highs.”

“I believe that the main concerns in the short term are the short-term foreign exchange balance, in the face of a lower supply and higher demand, as well as the pre-electoral panorama and the YPF ruling, where there is not still clarity on the scope, implications, and strategies to be adopted by the authorities,” he told the Herald.

Pablo Repetto, head of research at broker Aurum Valores, said the U.S. dollar remains “very firm” despite the agricultural liquidation, because the demand is still very high.” 

“On top of that, there are only a few days left for the agricultural liquidation,” he added. “There are many who prefer to advance [U.S. dollar] purchases in case it goes up more.”