Argentine gov't appeals rulings on central bank

* Tension ahead of expected sovereign debt swap

* Government defends plan, opposition vows fight

BUENOS AIRES Jan 9 (Reuters) - Argentina's government filed an appeal on Saturday against a court ruling that blocked its plan to use Central Bank reserves to pay debts and ordered the bank president's reinstatement, the Cabinet chief said.

A deepening dispute over President Cristina Fernandez's plan to use billions of dollars in foreign currency reserves for debt repayments this year has rattled financial markets and stoked political tensions in Latin America's No. 3 economy.

Fernandez sacked Central Bank President Martin Redrado by decree on Thursday, but a federal judge ordered he be reinstated a day later. The same judge also issued an injunction blocking the transfer of reserves to state coffers.

"The government, in keeping with the responsibility and respect with which we've handled this issue, has presented its appeals," Cabinet Chief Anibal Fernandez told local television.

The turmoil at the central bank has highlighted political instability in Argentina just as Fernandez's cash-strapped government seeks to charm investors and issue global bonds eight years after a massive default.

Argentine bonds, stocks and the peso lost ground this week due to investor concerns over the strength of Argentina's institutions before a sovereign debt swap expected to be launched later this month. [ID:nN08135180]

Fernandez has defended the plan to use reserves, and government ministers have accused Redrado of plotting with the opposition to destabilize the government, a charge he denies.

Emboldened by gains in a midterm vote last year, opposition leaders have vowed to try to overturn the presidential decrees that set up the debt repayment fund and ousted Redrado.

They say the episode shows she will go to any length to get her hands on extra state funds in an effort to boost her flagging popularity ratings by hiking social spending in the run-up to the 2011 presidential election.

Legal experts are divided over whether lawmakers or the courts can overturn presidential decrees, but Fernandez's opponents say the decrees are unconstitutional because both measures needed approval from Congress. [ID:nN08236201]

Congress is in recess until March, but opposition lawmakers started to cancel their vacations and some vowed to seek an emergency session of the lower house on Jan. 20.

Tensions have been high in Argentina for much of Fernandez's term, but Argentine assets had rebounded in recent months on hopes the government would soon settle with holders of $20 billion in bonds left over from a huge 2001/02 default. (Reporting by Karina Grazina and Helen Popper; Editing by Peter Cooney)