June 12, 2018 / 5:28 PM / in 10 months

Argentina peso firms as central bank returns to market

BUENOS AIRES, June 12 (Reuters) - Argentina’s peso strengthened on Tuesday, breaking two sessions of losses after the country reached a funding deal with the International Monetary Fund, as the central bank returned to the foreign exchange market offering dollars, traders said.

The peso was up 1.1 percent at 25.8 per U.S. dollar as of 2:08 p.m. local time (1708 GMT), rebounding from a record low of 26.20 touched on Monday. The traders said the central bank, along with state-run Banco Nacion, had offered to sell dollars at various times and at several different levels.

“Only the dollars from the state-run banks can calm the foreign exchange tension,” one trader said on condition of anonymity, adding that other market actors were expecting further depreciation and were holding onto their dollars as a result.

“There are no signs that private investors want to sell.”

A run on the peso prompted Argentina to announce on May 8 that it was turning to the IMF for assistance. The central bank hiked interest rates to 40 percent, the world’s highest, and for weeks repeatedly offered to sell $5 billion in reserves at 25 pesos per dollar, effectively preventing the peso from falling below that level.

But the monetary authority withdrew that offer on Friday, the day after the $50 billion standby arrangement with the IMF was announced. Central bank Governor Federico Sturzenegger had said on Thursday that the exchange rate “turbulence” had been “surpassed,” foreshadowing the withdrawal of the offer.

The central bank was expected to announce its twice-a-month policy rate decision later on Tuesday. (Reporting by Jorge Otaola; writing by Luc Cohen; editing by Jonathan Oatis)

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