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May 30, 2017

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Argentine peso stabilizes as government eases forex controls

BUENOS AIRES--Argentina's peso stabilized Friday after plunging 14 percent in panic-selling over two days, helped by the government's removal of some exchange controls and the central bank's reported resumption of intervention.

One day after the Argentine peso suffered its worst single-day fall in more than a decade, the government abandoned an unpopular ban on buying dollars, allowing citizens to once again hedge against the plunging value of the peso by hoarding their savings in foreign currency.

After sinking from 6.89 pesos per U.S. dollar on Tuesday to 8.01 Thursday, the currency held steady.

And on the black market, where the greenback bought 12.50 pesos Thursday, it eased to 11.70 pesos, though reports said there was little activity.

The Ambito Financiero business newspaper said the Central Bank spent some US$160 million to hold the peso up on Friday, after stepping out of the market for two days and watching it tumble.

Jorge Capitanich, the head of President Cristina Kirchner's cabinet, said the currency "has reached an acceptable level" of about eight pesos to the dollar under a policy of "managed flotation."

Amid worries of a repeat of the country's 2001-2002 financial crisis, the cabinet dropped the unloved 2011 rule restricting Argentineans' access to foreign currency.

The government has decided "to authorize the purchase of dollars for spending or saving," Capitanich said at a press conference flanked by Economy Minister Axel Kicillof.

Capitanich argued that the restrictions had always been temporary and had served their purpose. He said that a 35 percent surcharge on dollar purchases will be reduced to 20 percent beginning next week.

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