As Argentina's government continues to drain reserves to prop up the struggling peso, investors in the country are intensifying bets that President Javier Milei will allow the currency to weaken following mid-term elections this month.

Argentina's Finance Ministry intervened in markets for the seventh consecutive trading day on Wednesday, selling at least $320 million, according to two people directly familiar with the matter. Over the previous six trading days, the ministry is estimated to have sold approximately $1.5 billion to support the peso.

Short-term interest rates have also surged to record highs, highlighting tightening liquidity conditions. Yields on local government Lecap bonds maturing October 31 jumped to 97% from 76% the previous day, while yields on bonds due November 28 rose from 74% to nearly 87%.

"The market seems to be pricing in an exchange rate regime change the day after the election, which means the closer we get to election day, the greater the pressure on the exchange rate," said Santiago Resico, an economist at brokerage firm one618. "The Finance Ministry's massive daily dollar sales are clearly not helping."