Barclays Plc says the real effective exchange rate should be as much as 30% weaker to stimulate the economy. StoneX and local broker One618 say the peso’s excess valuation is closer to 20%. Many other investors and analysts consulted by Bloomberg didn’t want to offer a precise estimate, but they agree that, to one degree or another, the peso needs to drop.

A strong currency was always part of Milei’s two-pronged plan — along with fiscal austerity — to tame inflation and stabilize the economy. And while it’s been effective in dragging inflation down from over 200% a year ago to 33.6% today, its overvaluation, analysts say, has steadily swelled month after month, sparking jitters in a nation with a long history of devaluations and defaults.

Signs of pain from excessive peso strength are widespread: More Argentines doing their shopping overseas; renowned meatpackers importing beef, a flagship Argentine export, because it’s more affordable than the local version. Meanwhile, the economy is sputtering, dragged down in part by the budget cuts.

Even as authorities allowed the peso to slide more rapidly in recent weeks — pressured by investors’ concerns around Milei’s political support — analysts warn that bolder depreciation is needed to balance the economy and comply with the terms of the $20 billion deal signed with the International Monetary Fund earlier this year.

“The IMF is asking for an annual current account surplus of about $10 billion, which would only be reached with a peso between 1,650 and 1,700 per dollar,” compared with 1,408 at the close on Monday, said Juan Manuel Pazos, chief economist at local broker One618.

The peso climbed 3.8% on Tuesday, a second day of gains for Argentine assets ahead of a meeting between Milei and US President Donald Trump in New York. Dollar bonds were up across the curve, with notes maturing in 2035 gaining almost two cents to trade above 58 cents on the dollar, according to indicative pricing data compiled by Bloomberg. 

Ramiro Blazquez, an analyst at StoneX, also believes that the peso remains overvalued by almost 20%. “I’d say an exchange rate between 1,500 and 1,600 pesos per dollar is more logical for Argentina,” he said.

Few expect Milei will let the peso weaken further before midterm elections in October. Particularly after a tough defeat in a local vote in Buenos Aires two weeks ago that triggered a steep selloff in the country’s assets.

“After the elections, the government will need to move in that direction — if it dares,” Pazos said, referring to the midterms.

Milei’s government got a strong boost on Monday from the Trump administration, with Treasury Secretary Scott Bessent vowing to provide “all options for stabilization.” At the same time, the prospect of a US rescue could buoy appetite for the peso, making it harder to achieve the recalibration the currency needs.

More details are expected after the leaders of the two countries meet on Tuesday in New York. 

Bessent’s comments were “a big deal and the promise alone will lift the peso without any actual intervention having to happen,” Brookings Institution economist Robin Brooks said on X. “Problem is that this makes Argentina’s overvaluation worse, not better.”