Reuters: US Dollar Report: Argentina dollar deposits dip on crackdown-sources

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Argentina dollar deposits dip on crackdown-sources May 31st 2012, 22:58 Thu May 31, 2012 6:58pm EDT * Gov't controls on dollar-buying rattle savers, companies * Investors fear further curbs on currency transfers abroad * Sources estimate $1.3 billion in withdrawals since May 11 By Jorge Otaola and Walter Bianchi BUENOS AIRES, May 31 (Reuters) - Argentine banks have lost about 10 percent of their dollar deposits in less than three weeks from fears over fresh government controls on foreign currency purchases, four banking sources said. President Cristina Fernandez imposed restrictions on dollar purchases late last year after surging demand for greenbacks forced the central bank to spend several billion dollars in foreign reserves to prop up the peso. Savers and companies started drawing money out of dollar-denominated bank accounts earlier this month when the AFIP tax agency charged with controlling foreign-currency purchases cracked down on buying at the official rate , the sources said. "The withdrawal (of dollar deposits) is unhurried but steady," one banker said on condition of anonymity. Four banking sector sources estimated the amount taken out of bank accounts since May 11 at $1.3 billion, roughly 10 percent of the total. Central Bank data showed total dollar deposits of $12.45 billion on May 18, down from $13.14 billion on May 4 - before the tax agency intensified its crackdown. A spokesman at the monetary authority declined to comment on the dollar withdrawals, which is a sensitive subject in Argentina 10 years after a sharp economic crisis caused the banking sector to collapse. Argentines tend to save in greenbacks and often withdraw them from the bank at times of heightened political uncertainty in Latin America's No. 3 economy, where memories of the deposit limits and sharp devaluation of the crisis remain fresh. CENTRAL BANK RESERVES Former Deputy Economy Minister Jorge Todesca said banks could potentially withstand the withdrawal of all dollar deposits. "The system can stand it because these deposits have very high reserve requirements and the Central Bank has got the reserves," he said. The Central Bank's reserves, which Fernandez's administration plans to tap again this year to meet debt repayments, stood at just over $47 billion through Thursday. Some investors are concerned the government could start to curb overseas transfers of coupon payments on sovereign bonds as it battles to keep dollars in the country. Yields on Argentina's Boden 2012 bond, on which the government is due to pay a $2.3 billion coupon in August, rose to more than 19 percent on Wednesday. Under the controls imposed late last year, the AFIP agency gives prior approval for all foreign currency purchases in the formal market, either granting or refusing requests on the basis of income or any tax irregularities. Traders say even tougher limits on purchases this month have smothered trade in the formal market, driving some jittery savers to pay a much higher price for safe-haven dollars in the black market - dominated by off-the-books deals by foreign exchange houses and measured by Reuters. Last week, the peso fell to a record low of 6.40 per dollar. It has since firmed and closed at 5.92 per dollar on Thursday. The local currency has also weakened sharply in the so-called blue-chip swap market, which reflects the implied exchange rate used to buy Argentine shares or bonds that can be sold for dollars overseas. In that market, the peso ended at a record low of 6.40 per dollar on Thursday. That compares with the official, interbank rate of 4.4725 per dollar. Soon after Fernandez put the measures on the dollar in place, foreign-currency deposits fell 17 percent though they stabilized in subsequent months. Link this Share this Digg this Email Reprints

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