A significant financial rescue effort from the United States appears to have failed in restoring Argentinians' confidence in the peso, instead igniting a market rivalry characterized by "you buy, I sell."

According to reports on October 17, to prevent the depreciation of the peso, U.S. Treasury Secretary Janet Yellen has taken action, not only directly purchasing pesos but also publicly stating that it is "undervalued." The U.S. is even considering a plan to double the initial $20 billion swap facility to $40 billion through private arrangements with international banks.

However, these efforts have not soothed market panic. Argentine investors and citizens firmly believe that after the legislative election on October 26, President Javier Milei will have no choice but to allow the peso to decline. Interventions supporting the peso have drained liquidity from the financial system, causing short-term interest rates to soar to a staggering 157%, adding further strain to an already fragile economy and reinforcing pessimistic market expectations.

Compounding the situation, President Donald Trump’s statements this week have shaken the last bit of market confidence. He hinted that if Milei loses the election, the U.S. would withdraw its support. This remark has been interpreted as an attempt to influence the electoral outcome, raising serious doubts about the sustainability of U.S. rescue commitments.

With a lack of market confidence, the sell-off persists. This skepticism is clearly reflected in the peso's exchange rate movements. Data indicates that following Yellen’s initial promise of assistance on the week of September 22, the peso briefly rebounded, but it has been depreciating against the dollar almost every trading day since September 29.

"Yellen’s statements are experiencing diminishing marginal effects; each new one has a shorter-lived impact than the last… The market does not believe Yellen, even when she is putting real money on the line," said Ezequiel Asensio, a portfolio manager at Valiant Asset Management with 30 years of trading experience in Argentina.

Data on capital flight confirms this distrust. According to the Central Bank of Argentina, in the five months ending in August, Argentinians net purchased $18 billion—equating to about $400 per resident. Market participants estimate that Argentine savers are still buying approximately $300 million daily.

The impending legislative elections have become the core variable for market pricing. Last month, Milei’s party faced significant setbacks in local elections in Buenos Aires, intensifying concerns about potential roadblocks to his free-market agenda and accelerating the trend of capital fleeing the peso.

Lucio Arrocha, a strategist at StoneX, believes depreciation is inevitable. He stated that the only question now is about the magnitude of the depreciation if Milei loses the election and capital flight accelerates. "This country does not have enough dollars to cope with the looming capital outflows," he added.

Former Argentine Finance Minister Miguel Kiguel expressed a similar sentiment: "This situation cannot last much longer. People still believe the interventions will continue until the election, but how things will proceed afterwards is anyone's guess."

This currency defense struggle has led some market participants to recall history. Yellen herself was previously involved in George Soros' hedge fund during the successful short-selling of the British pound in 1992. At that time, the United Kingdom was also defending an unsustainable exchange rate and was ultimately forced to abandon it. Javier Timerman, managing partner at Buenos Aires’ AdCap Grupo Financiero, regards that historical episode as a "cautionary tale" for Yellen's current efforts.

"All Argentinians, investors, and analysts believe the exchange rate must adjust," Timerman said.

Economic fundamentals also support expectations of depreciation. A key reason is that the peso's exchange rate fails to adequately reflect the country's high inflation levels. Despite the consumer price index rising by 12% since April, the current exchange rate still aligns with the unofficial rate from that time, indicating the peso is significantly overvalued.