BUENOS AIRES, Jan 26 (Reuters) - Argentina’s peso ARS=RASL fell on Monday as the central bank bought dollars early in the day in a bid to strengthen reserves, pushing the local currency to lows not seen since the country’s 2002 financial meltdown.
The bank is also trying to keep the peso competitive against the currency of major trade partner neighboring Brazil. The Brazilian real has fallen against the dollar in recent weeks. A weaker local currency bolsters a country’s exports.
Private Argentine investment funds also sought greenbacks ahead of more expected central bank dollar purchases, helping to push the local currency down 0.07 percent to a closing interbank level of 3.4800/3.4825 per dollar.
The peso had slid as low as 3.4875 per dollar during the session, but toward the end of trade the central bank reversed course and started buying dollars to halt the peso’s slide.
“The market was slowed when the central bank intervened with dollar sales, whereas earlier the bank had been continuing with its dollar purchases,” one market player said.
The peso has not been this weak since Argentina’s shock currency devaluation in 2002, which was accompanied by the world’s biggest sovereign debt default and an economic crisis in the South American country.
In informal trade between foreign exchange houses, as measured by Reuters, the peso currency closed at 3.5200/3.5250 per dollar ARSB=.
Argentina’s benchmark MerVal stock index .MERV was dragged lower by losses on Wall Street and fell 0.47 percent to 1,061.47 points. On the broad market, volume was weak at $12 million. Of active issues 17 declined, 23 advanced and 15 were unchanged.
Argentine government bonds traded over-the-counter in Buenos Aires rose 1.0 percent on average as the market awaited the results of a loan swap to be carried out by the government this week aimed at improving the country’s debt profile. (Reporting by Jorge Otaola, writing by Hugh Bronstein, Editing by Chizu Nomiyama)