Argentine stocks fall with oil, peso at 11-mth high

jueves 29 de mayo de 2008 18:16 ART

BUENOS AIRES May 29 (Reuters) - Argentine stocks fell as heavyweight oil industry issues dropped with global crude prices on Thursday, while the peso currency hit an 11-month high as private banks sold dollars to avoid losses due to central bank market intervention.

The benchmark MerVal index .MERV slipped 0.42 percent to 2,223.89 points, led by Buenos Aires-traded stock of Brazilian oil company Petrobras APBR.BA, which slumped 2.99 percent to 114.95 pesos per share.

Oil prices dropped $4 on Thursday on signs of lower demand in the United States and on gains in the U.S. dollar.

Volume on the broad stock market in Buenos Aires was low to moderate at $23 million and active issues showed 41 gainers, 23 losers and 21 unchanged.

"Investors are being very selective in the context of being very prudent because of the farm conflict," said Juan Diedrich, analyst with Capital Markets Argentina brokerage.

The government and the powerful agricultural sector have been locked in a standoff for more than two months over soy export taxes. Farm protests and interruptions to grains exports have sparked concerns for the economy and political stability.

The peso rose 0.16 percent to 3.1100/3.1125 per dollar in formal interbank trade ARS=RASL. That was the strongest level for the interbank peso rate since July 2007. In informal trade between foreign exchange houses, as measured by Reuters, the peso gained 0.16 percent to 3.1925/3.1950 per dollar ARSB=.

The Central Bank had been selling dollars on the foreign exchange market in recent weeks, to counteract ballooning demand for dollars due to investor anxiety over the farm conflict.

Traders said private banks began unwinding dollar positions that had been losing value under the Central Bank's policy of providing dollars to the market to keep the peso in a tight range.

"There's no turning back. If it weren't for the Central Bank, the dollar would be sky high," said a currency trader referring to the dollar demand trend. (Reporting by Jorge Otaola, writing by Fiona Ortiz; Editing by Diane Craft)