Reuters: US Dollar Report: Dollar outflows persist in Argentina, peso weakens

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Dollar outflows persist in Argentina, peso weakens May 23rd 2012, 20:35 By Jorge Otaola and Walter Bianchi BUENOS AIRES | Wed May 23, 2012 4:35pm EDT BUENOS AIRES May 23 (Reuters) - Dollars are being withdrawn from Argentine banks - up to $100 million per day according to one banking source - as savers grasp for greenbacks in reaction to a government crackdown on access to the U.S. currency. Last week, tax authorities clamped down on dollar withdrawals to make up for slower inflows of the U.S. currency. The move was one of many government policies, including import curbs, that have hurt confidence in Latin America's No. 3 economy. The peso explored historically weak levels on the unofficial market, hitting 6.15 to the greenback on Wednesday. The jarring curbs on access to dollars have made Argentines nervous about the future of the peso while exports to its largest trade partner Brazil slow due to slackening demand from the neighboring country. Weak soy and corn harvests, walloped by a December-January drought, are also pinching dollar inflows and raising questions about what Argentina might do next to protect central bank foreign reserves, which are used to pay government debt. "Fear is inducing people to try to get their hands on dollars to hold onto at home or put into safety deposit boxes," one banker told Reuters, asking not to be named. Another banking source with direct knowledge of the situation said Argentina's financial system was losing $100 million per day due to the fever pitch dollar demand. The spread between the official dollar-peso rate and the black market rate widened to 38 percent on Wednesday. Argentina's banking system shed 17 percent of its dollar deposits in November, just after newly re-elected President Cristina Fernandez imposed new rules on foreign currency purchases, requiring prior approval from the tax agency. The policy uncertainty increased last week when those rules were made even stricter. Fernandez easily won a second term October despite complaints from business groups, farmers and trade partners about her interventionist policies. The country's strong-growing economy bolstered her popularity during her first four-year term. But its expansion is slowing due to global economic sluggishness. Fernandez's budget forecasts 5.1 percent growth this year, down from 8.9 percent in 2011. Link this Share this Digg this Email Reprints

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