The official wholesale exchange rate in Argentina reached its all-time high on Thursday, with a value of AR$1,380 per U.S. dollar.

In only one day, the dollar jumped by 55 pesos from AR$1,325.

The greenback had been increasing in the last weeks amid pre-electoral tension, spiraling interest rates, and the government’s decision not to buy international reserves through the Central Bank.

“The dollar moved strongly upwards today because the pesos from Tuesday’s bond auction that were not renewed entered the market, and also because of the expiration of the S31L5 bond,” Pablo Lazzati, CEO of the Insider Finance brokerage firm, told the Herald.

On Tuesday, a peso debt auction by Argentina’s Economy Ministry ended with the government refinancing only 76% of its maturities, even when it paid a monthly rate of 4.28% for a 15-day Lecap — a 65% annual interest rate, three times the inflation figure and one point above what the Finance Ministry approved in an auction two weeks ago.

“All those pesos in the market caused part of them to go to the dollar,” Lazzatti said, adding that part of it will go to peso bonds and another to buying U.S. dollars. “We will have to wait until Monday to see at what price it stabilizes,” he added.

In April, after striking a new deal with the International Monetary Fund (IMF), Argentina adopted a currency band scheme that allows the U.S. dollar to float between two values, originally AR$1,000 to AR$1,400. The Central Bank buys or sells dollars to manage the exchange rate if it reaches these limits. 

The IMF allows the administration to buy dollars to accumulate reserves, but the Central Bank has chosen not to, although the Treasury has carried out some purchases.

“NO PURCHASES WILL BE MADE UNTIL IT REACHES $1,000,” Milei posted on X shortly after the deal with the IMF was signed. In an interview that month, the president forecasted the dollar’s value would be AR$900.

Apart from the interest rate, the government is intervening in the futures contracts market to contain the value of the U.S. dollar. However, on Thursday, those contracts priced the exchange rate at AR$1,528 by the end of December, above the ceiling of the currency band, which, rising 1% per month, would be AR$1,526.

Gustavo Quintana, an analyst and broker for PR Corredores, told the Herald that there is not a single reason for Thursday’s increase. Instead, he said that agricultural exporters slowed their dollar liquidation pace and that the end of the month marks a time when investors reassess their portfolios, this time demanding dollar coverage. “These movements encourage those who can and have the means to sell not to do so in anticipation of further increases,” he said. “On the contrary, those who have pesos and want to pay want to anticipate a potential rise, do so with the same argument.” 

“The market becomes unbalanced, and values adjust to the level where they find a balance,” he added.

Pablo Repetto, head of research at broker Aurum Valores, said the increase was “too abrupt.” “An exchange rate correction to a range of AR$1,320 to AR$1,350 is healthy, but here I think it went a little too far,” he said. “I think it’s a readjustment that will settle a little lower in the next few days, not much lower,” adding that interest rates, which now range from 40 to 65%, should be at around 30%.

Earlier this month, Economy Ministry Luis Caputo took a jab at analysts who claimed the government has artificially propped up the peso in a bid to contain inflation. “To anyone who thinks it’s that cheap, grab the pesos and buy [U.S. dollars],” Caputo said ironically. “Don’t miss out on it, champ. If you have pesos, the exchange rate is floating, and you know for a fact it is very cheap, go ahead and buy,” he added.

From that moment, the exchange rate went up by AR$135, almost 11%.