(Bloomberg) -- Argentina’s peso is tumbling as Argentines rush to exchange pesos for dollars ahead of presidential elections later this month, posting its worst losses since an August selloff.  

The nation’s parallel exchange rate, known locally as the blue-chip swap, has tumbled as much as 12.6% this week on parallel exchanges to a record 900 pesos per dollar, bringing the gap between the official and parallel exchange rates to around 157%, the highest since July 2022. It’s the sharpest drop in the parallel rate since the government devalued the official rate it controls following the Aug. 13 primary election.  

Argentines are flocking to parallel markets to dollarize their salaries to shield themselves against 120% inflation and another sharp currency devaluation that economists say is inevitable sometime after the Oct. 22 vote. The central bank is out of reserves to defend the currency, and the incumbent left-leaning administration’s spending plans to win over voters only puts more pressure on inflation and the exchange rate ahead of the election.

Argentina’s beleaguered peso — by far the worst performer in emerging markets — is also being dragged down by a rout in global risk assets that has weighed on emerging market currencies and driven up bond yields worldwide.

Leading presidential candidate Javier Milei’s proposal to dollarize the economy and shutter the central bank is also driving Argentines to snap up dollars as fast as possible, according to local brokerage Portfolio Personal Inversores.

“Consensus is gaining in the market that the complex dollarization plan of the candidate who leads the polls could be exacerbating the typical pre-election dollarization of portfolios,” PPI analysts led by Pedro Siaba Serrate wrote in a note.

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