The world's highest interest rates and backing from the International Monetary Fund have failed to reassure investors.
In response, the central bank has hiked interest rates to 45% and sold more than $13 billion in reserves, including $300 million in an auction on Wednesday.
The scandal came to light in early August, when Buenos Aires-based newspaper La Nacion published excerpts from the notebooks of a former driver in the Fernandez administration.
Argentina's peso lost as much as almost one-fifth of its value on Thursday despite the central bank's hiking its benchmark interest rate to a dizzying 60 percent as investors panicked over President Mauricio Macri's handling of an economic crisis.
"We have agreed with the International Monetary Fund to advance all the necessary funds to guarantee compliance with the financial program next year", President Mauricio Macri said in a televised address on Wednesday.
Some experts said the announcement, combined with the interest rate hike, had the unintended effect of fueling the crisis of confidence.
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The situation prompted President Mauricio Macri to seek funds from the International Monetary Fund in May. "Hyperactivity starts to look like desperation".
The three-year standby financing deal is aimed at strengthening its weak economy and helping it fight inflation, which at 30% per year is one of the highest rates in the world. "The prices of everything go up on a daily basis", he said.
Chief IMF spokesman Gerry Rice said: "Argentina has the full support of the Fund and we are confident that the strong commitment and determination of the Argentine authorities will help the country overcome the current difficulties". He cut red tape and tried to reduce the government's budget deficit by ordering layoffs and cutting utility subsidies, but it triggered labor unrest.
The IMF's director general is still sticking to Mr. Macri's plan.
Argentina's peso began to recover on Friday (Aug 31) as markets opened, making a tiny 0.68 per cent gain after losing 20 per cent of its value against the dollar over the previous two days.
The peso's Thursday decline followed an earlier fall of 7% on Wednesday, culminating in the currency's steepest decline since it floated in 2015. Dozens died in protests and looting in December 2001 as the economy unraveled and Argentina eventually suffered a record $100 billion debt default. REUTERS/Agustin Marcarian source Pedestrians walk past an electronic board showing currency exchange rates in Buenos Aires' financial district, Argentina, June 29, 2018. "In the short-term, the government just needs to stop this crisis".
Turkey and Argentina have been at the forefront of an emerging-markets selloff sparked by concerns that higher USA yields will pressure countries that had borrowed heavily in dollars over the past few years.