BUENOS AIRES, June 18 (Reuters) - Argentine stocks and bonds rebounded on Wednesday from steep falls a day earlier, as a prolonged conflict between the government and the farm sector abated.
The MerVal index .MERV gained 0.59 percent to close at 2,048.11 points, after falling to a three-month low on Tuesday. Volume was very weak at $15 million and among active issues, 41 advanced, 21 declined and 10 were unchanged.
Banco Patagonia BPAT.BA jumped 9 percent to 2.05 pesos per share, but in slim volume.
"The MerVal was logically reacting to a calmer political outlook, since any sign of solution to the conflict allows the hardest-hit issues to rebound, like banks and services," said Leopoldo Olivari, analyst with Bacque brokerage in Buenos Aires.
A three-month standoff between the government and the farm sector over a controversial hike in soy export levies has spooked investors as farmers hold back grains from markets and fears have risen that the economy could be hit.
The conflict eased after President Cristina Fernandez said late on Tuesday she was asking Congress to ratify the soy tax. Farmers were analyzing the bill sent to lawmakers and whether to call off their protest measures.
Capital Markets Argentina consulting firm said in technical terms the MerVal has established a support level of 1,850 points.
Government debt traded on the local market rose 0.8 percent, led by a 2.4 percent rise in the peso-denominated Par bond. Bond prices have been hit hard during the farm crisis, and are not expected to fully recover unless there is a definitive resolution.
In the foreign exchange market, the peso ARSB= strengthened thanks to Central Bank sales of dollars. The official interbank rate ARS=RASL appreciated 0.8 percent to 3.0325/3.0350 per dollar.
In informal trade between foreign exchange houses, as measured by Reuters, the peso strengthened 0.24 percent to 3.1175/3.1200 per dollar ARSB=.
Central Bank President Martin Redrado on Wednesday defended the use of foreign reserves to manage the exchange rate.
"We've marked a clear trend, moderating expectations in the exchange market and we've assured systematic stability," he said at a conference organized by LatinFinance magazine in Buenos Aires. (Reporting by Jorge Otaola and Walter Bianchi, writing by Fiona Ortiz; editing by Gary Crosse)