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Argentine Peso Gains Most in Emerging Markets as Dollars Sold

Feb. 7 (Bloomberg) -- Argentina’s peso rose the most among emerging-market counterparts and posted its biggest weekly gain in five years as the central bank limited commercial lenders’ foreign currency holdings to boost dwindling reserves.

The peso appreciated 0.5 percent to 7.8409 per U.S. dollar at the close in Buenos Aires, extending its weekly rally to 2.2 percent, the first since March 2012 and the biggest since November 2008. The peso in the blue-chip swap, or the rate implied from financial transactions, strengthened 7.8 percent to 10.8386, the biggest increase in data beginning in 2009.

The official peso gained as banks sold dollars to comply with a measure published Feb. 4 requiring them to reduce foreign-currency holdings to 30 percent of assets and cut futures contracts on foreign currency to 10 percent of portfolios by April 30. The government devalued the peso 15 percent in the week ended Jan. 24 to persuade farmers to sell hoarded soybeans for dollars abroad. Central bank reserves dropped to a seven-year low of $27.7 billion Jan. 31.

The peso is strengthening because “they forced banks to sell dollars,” Ezequiel Aguirre, a strategist at Bank of America Corp., wrote in an e-mailed response to questions. “It’s a patch measure. It buys a little time until the harvest or until there’s a deeper measure.”

Since the move, the central bank bought $30 million in the foreign-currency market and $801 million from deposits banks already had in the monetary authority, according to a bank official who isn’t authorized to speak publicly on the matter.

The benchmark Merval stock index tumbled 5.3 percent today, in line with the drop of the dollar in the blue-chip swap. Shares are tied to the U.S. currency value of their American depository receipts.

To contact the reporter on this story: Camila Russo in Buenos Aires at crusso15@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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