Argentine stocks, peso weaken on debt fund crisis
* Doubts govt can create debt guarantee fund with reserves
* Local banks hit as they major Argentine bond holders
* Sell off limited on high expectations behind 09 rally
BUENOS AIRES, Jan 8 (Reuters) - Argentina's currency, bonds and stocks weakened on Friday amid political conflict over the president's plan to use the Central Bank's foreign reserves to guarantee debt payments this year.
The benchmark MerVal stocks index .MERV was off 1.24 percent to 2,359.80 points at 1740 GMT, partly recovering from a fall of more than 2 percent in early trade.
The country's biggest financial conglomerate Grupo Financiero Galicia GFG.BA was one of the top value leaders, off 1.37 percent to 2.16 pesos per share.
Local banks are major holders of Argentine sovereign bonds and their stock tends to fall when bond prices are hit.
Bond prices fell an average 1.7 percent in over the counter trade in Buenos Aires, as measured by Reuters, on doubts over whether the government will be able to create its debt guarantee fund with foreign reserves.
The fund would remove perceived risk of a default as debt obligations rise steeply this year just as growth in government income has slowed due to an economic slowdown. Continuación...