BUENOS AIRES, June 3 (Reuters) - Argentina's peso firmed on Tuesday to a 17-month high in interbank trade as the central bank worked to ease jitters over a prolonged farm strike, traders said, while stocks slipped and government bonds rose.
The peso strengthened 0.57 percent to close at 3.0675/3.0700 per dollar in formal, interbank trade ARS=RASL, after slumping to a low of 3.18 per dollar in early May.
The currency strengthened 0.16 percent to end at 3.1475/3.1500 per dollar in informal trade between foreign exchange houses, as measured by Reuters ARSB=, reaching a six-month high.
Farm leaders extended their strike over grains export taxes through the weekend. This is the third farm protest since March, when the government unveiled a new sliding-scale tax scheme linked to global grains prices.
The stubborn conflict has caused uncertainty in Argentina and was pressuring the peso lower until the central bank began flooding the market with dollars to reverse the trend.
Private investors are also selling dollars to cut their losses as the greenback continues to lose ground.
"The market continues to be somewhat out of whack because there's still a significant excess of dollars, a trend which is fueled by the central bank itself," a currency trader said.
"Many of us are wondering how far this drop (in the dollar) will go because (the central bank) keeps giving away foreign reserves," he added.
The bank's reserves have fallen by nearly $2 billion since hitting a record $50.5 billion in late March.
Argentine stocks fell on Tuesday, tracking other regional bourses lower. The benchmark Merval index .MERV fell 0.73 percent to 2,181.76 points, erasing early gains.
Losses were led by Brazilian state energy company Petrobras APBR.BA (PETR4.SA), which fell 4.9 percent to 109.10 pesos per share in Buenos Aires, along with a slump in crude oil prices.
Volume on the overall market was a thin $14.6 million.
Government bonds sold locally <AR/BONOS> rose 0.4 percent on average in over-the-counter trade after suffering steep losses recently. Dollar-denominated Discount paper led gains by rising 0.7 percent.
Trade was thin amid investor uncertainty over the farm strike's repercussions, which has fueled 20 percent losses in some bonds in the last few weeks. (Reporting by Jorge Otaola and Walter Bianchi; Writing by Hilary Burke; Editing by Leslie Adler)