(Updates with closing prices)
BUENOS AIRES, June 19 (Reuters) - Argentina's peso closed unchanged on Thursday after touching a two-year high intraday as the Central Bank sold dollars to stabilize the currency during a political crisis.
Most stocks fell, but the benchmark index rose led by heavyweight oil-linked issue Tenaris (TENA.BA), which skyrocketed almost 10 percent to a record high of 109.3 pesos per share.
Tenaris was boosted because options to buy the stock expired on Thursday and because of a good outlook for demand for its steel tubes for the oil industry as crude prices remain high.
"The fundamentals of the (oil) sector are still good," said Antonio Cejuela, an analyst with Puente Hermanos brokerage in Buenos Aires.
The peso ARS=RASL closed flat at 3.0325/3.0350 per dollar in formal interbank trade, after touching 3.0250/3.0275 during the day, its strongest level in two years.
In informal trade between foreign exchange houses, as measured by Reuters, the peso strengthened 0.32 percent to 3.1075/3.1100 per dollar ARSB=.
Traders said the central bank continued tapping its foreign reserves to shore up the peso and avoid a run on the currency, as a three-month tax dispute between the government and farmers kept the country alert to possible food and fuel shortages.
Farm leaders extended their latest partial strike through Friday, vowing to withhold grains from market but allow other farm products to be sold.
With grain sales disrupted, many exporters are no longer cashing in their dollars for pesos on the foreign exchange market. Traders said the central bank has effectively acted to replace them, as private investors continue betting on safe-haven greenbacks.
"Our action (in recent weeks) was forceful, the demand for pesos strengthened significantly, putting a stop to a tendency toward depreciation and avoiding possible undesired effects on prices," Central Bank President Martin Redrado told a conference organized by LatinFinance magazine on Wednesday.
"Not using our foreign reserves at a time of demand for dollars would have been absurd," Redrado said.
Since mid-May, the central bank's foreign reserves have fallen more than $2 billion to about $47.7 billion BCRA32. Reserves hit a record high of $50.5 billion in late March.
Meanwhile, the benchmark MerVal stocks index .MERV added 0.73 percent to close at 2,063.19 points, boosted by gains in Tenaris.
Trading was healthy at $37 million, with about 44 percent of the value corresponding to Tenaris trades. Of active issues 10 rose, 51 fell and 18 were unchanged.
But government debt traded on the local market resumed its slump, falling 0.8 percent on average. (Reporting by Jorge Otaola and Hilary Burke; Editing by Jonathan Oatis)