Argentine Peso Gains After Limits on Bank Currency Holdings

Argentina’s peso gained the most since November 2008 after the central bank placed limits on the amount of foreign currency commercial banks can hold.

Argentine banks must limit the holdings to 30 percent of assets and cut futures contracts in foreign currency to 10 percent of assets by April 30, the central bank said in a resolution published on its website late yesterday. The peso gained 1.4 percent to 7.9 today in Buenos Aires, according to data compiled by Bloomberg.

The peso had hovered near 8 per dollar since the government devalued the local currency 15 percent in the week ending Jan. 24. President Cristina Fernandez de Kirchner’s government is trying to persuade farmers to sell hoarded soybeans for dollars abroad in an attempt to reverse a tumble in international reserves to a seven-year low. The central bank measure caused banks to sell dollar assets today to comply with the measures, according to Juan Diedrichs, a trader at Capital Markets Argentina.

“The measure is forcing banks to sell dollars and this drags down the official rate,” Diedrichs said in a telephone interview in Buenos Aires.

Onshore non-deliverable forward contracts that expire in three months gained 6 percent to 8.6 per dollar, according to data compiled by the Rosario Futures Exchange.

Blue-Chip Swap

A financial transaction market used by Argentines to obtain foreign currency also showed the peso gaining. The so-called blue-chip swap, which is an implicit rate derived from selling peso stocks or bonds for the same securities denominated in dollars, rose 3.2 percent to 12.1537 pesos per dollar.

The Merval benchmark stock index fell 3.5 percent.

The central bank today bought $386 million from deposits commercial banks had with the monetary authority, according to a bank official who asked not to be identified because he isn’t authorized to speak publicly about the matter. The purchase won’t have an impact on reserves because they were already part of the funds, the official said.

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