The exchange rate soared by 7% to as much as AR$1,470 per U.S. dollar in the retail market and Argentine stocks on Wall Street fell by up to 20% in the aftermath of the unexpected landslide Peronist win in the Buenos Aires legislative elections.

The EMBI or country risk index, which measures the likelihood of a debt default, ticked up to 1,100 basis points on Monday, an increase of over 100 points compared to Friday, according to the Herald’s sister publication Ámbito.

At press time, the wholesale exchange rate is AR$1,434.

“It is trading with trend changes and greater volatility, with no official activity detected so far,” Gustavo Quintana, an analyst and broker for PR Corredores, told the Herald. 

Argentine stocks traded on Wall Street through American Depositary Receipts (ADRs) recorded heavy losses, led by Grupo Supervielle (-20.2%), Grupo Financiero Galicia (-20.6%), Transportadora Gas del Sur (-20%), BBVA (-20%), and Banco Macro (-19%), among others.

Last week, Finance Secretary Pablo Quirno announced that the Treasury would intervene in the exchange market to “ensure liquidity” and that the market “operates normally” amid renewed exchange volatility.

“It would appear that the authorities are monitoring how the market is adjusting without interference,” Quintana said, adding that market estimations indicate that the Treasury holds US$1.1 billion to intervene.

In April, the government announced that the exchange rate would move freely between two rates depending on supply and demand, a scheme known as currency bands. Central Bank intervention was only allowed if the rate moved beyond band limits. The upper limit is currently AR$1,470.

Quintana said the exchange rate could reach the upper band this week, forcing the Central Bank to intervene.

On Sunday, the Peronist Fuerza Patria cruised to victory in elections to renew the local legislature in Argentina’s most populous province, with 47% of the vote. President Javier Milei’s La Libertad Avanza (LLA) came a distant second with 34%.

After the vote, Economy Minister Luis Caputo promised there would be no changes on the economic front. “Nothing will change economically. Not in terms of taxation, monetary policy, or exchange rates,” he posted on X.

A report by JP Morgan, issued the week before the elections, said that “a landslide victory for Kirchnerism in the regional election would suggest a steeper hill for the administration to present a positive result in October.” It forecast that “the exchange rate would likely climb up to the band ceiling” and that the government would increase “reserve sacrifice to absorb pesos.” 

“We assign a low probability to this scenario,” the report added.

Independent financial analyst Gustavo Ber said the result was “worse than anticipated [for the Libertarians]” and that “traders are leaning toward more liquid vehicles to unwind their bets.”

“The magnitude of the differences accentuates the political uncertainty leading up to the October elections,” Ber added.