Central bank using reserves to keep peso from falling too fast.
Argentine Peso Rebounds After Central Bank Offers $1 Billion.
By Drew Benson.
Oct. 29 (Bloomberg) -- Argentina's peso rebounded from its lowest in almost six years after the central bank offered to buy $1 billion of the local currency to stem a two-week slide.
The peso was little changed, down 0.1 percent at 3.3697 per dollar at 11:06 a. M. New York after sliding as much as 1.6 percent to 3.4226 earlier. The central bank initially offered to buy pesos at 3.39 per dollar before lowering it to 3.37, a bank spokesman said.
The central bank intervention set 'a floor'' for the exchange rate, sparking the rebound, said Fernando Izzo a currency trader with Buenos Aires-based ABC Mercado de Cambio.
'This market is crazy,'' Izzo said.
The central bank spokesman declined to say how much of the $1 billion worth of pesos it has bought so far.
To contact the reporters on this story: Drew Benson in Buenos Aires at [email]Abenson9@bloomberg. Net[/email]
Last Updated: October 29, 2008 11:20 EDT
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The central bank has to be carful not to use up too much reserves, to support the peso, since it’s already being taped to pay off the Paris Club debt. And in the future, it will be taped pay off government dept, to avoid a default. By taking over the pension funds, the government delays when they need to tap the central bank, but they will probably do so in 2010 or 2011 is my guess.
[QUOTE=Tessan]$6.4 billion debts with the Paris Club group of 19 creditor nations, so that will leave Ar with $40.5 Billion, form 50.5 Billion in March.[/QUOTE]Central bank reserves probably now below 40 billion and falling.