By Walter Bianchi, Jorge Otaola and Lucinda Elliott

BUENOS AIRES Confidence in Argentina's peso plumbed new depths on Wednesday as the currency slid to 780 pesos per dollar in the popular black market, where savers are willing to pay more than twice the official rate now pegged at 350 pesos per greenback.

The long-struggling peso, held in check by capital controls for years, plunged this week after a shock primary election result raised the possibility of a radical libertarian economist winning the presidential election in October. Households have rushed to convert their pesos to dollars as a more stable way to protect their savings.

On Monday, the central bank devalued the official exchange rate some 18% and hiked the benchmark interest rate to 118% to protect the peso and tamp down inflation, already running at more than 113% and squeezing people's savings and wages.

"Demand for dollars continues to be sustained as people look to hedge and are increasingly concerned about an acceleration of inflation after the devaluation," said economist Gustavo Ber, citing "a climate of political and economic uncertainty."

The Sunday primary vote saw outsider candidate Javier Milei, who has pledged to dollarize the economy and eventually scrap the central bank, win the largest share of the vote. He will face a three-way battle in an Oct. 22 general election.

As the peso has slid, the government has tried to stabilize the local currency, reducing access to some parallel foreign exchange markets, cracking down on informal street-corner currency traders and starting talks to cap meat prices to tame inflation.

Analyst Salvador Vitelli, however, said that despite the new measures a further devaluation was expected, even after the central bank pegged the official exchange rate at 350 pesos per dollar until the election.

"The market does not seem to believe that they will be able to maintain the exchange rate until October," he said.

Future wholesale peso prices, a reflection of market expectations about its likely price trajectory, show 460 pesos per dollar for October, 629 by year-end and 890 by July 2024.

Milei, who secured 30% of the vote in open primary elections on Sunday, will face the conservative opposition bloc of Patricia Bullrich, which won 28% and the Peronist coalition led by Economy Minister Sergio Massa, which received 27%.

Analysts see a tilt towards tighter economic policy regardless of who wins, though any new president will face major challenges to stabilize the economy amid triple-digit inflation, scant reserves and a fragile $44 billion International Monetary Fund loan deal.

Milei's dollarization pledge, some added, was also pushing more people to dump their pesos even though it would likely be very difficult to pull off in the near-term.

"The inevitable response of investors would be to shift out of pesos into dollars sooner rather than later," said Peter West, an economic adviser at consultancy EM Funding.

Argentina's S&P Merval stock index, seen as a hedge against local inflation, jumped 6.8% on Wednesday, extending its rise after a similar advance on Tuesday.

Sovereign bonds in the local over-the-counter market dropped by an average of 0.3%, slowing their decline after a sharper fall earlier in the week.

(Reporting by Walter Bianchi, Jorge Otaola and Lucinda Elliott; Editing by Jamie Freed)