September 3, 2014 / 11:42 PM / 4 years ago

Argentina lowers cap on commercial bank dollar holdings

BUENOS AIRES, Sept 3 (Reuters) - Argentina’s central bank said on Wednesday it had reduced the amount of dollars commercial banks could hold, a move that should push more greenbacks into the spot market and may give a mild boost to flagging reserves.

The new central bank rule states that from September the net foreign currency position of local banks cannot exceed than 20 percent of the bank’s worth, down from the previous ceiling of 30 percent.

The move could provide a brief fillip to the country’s anaemic international reserves, which stand at $28.6 billion, if the central bank purchases the U.S. dollars sold by banks and offer some light relief to the ailing peso.

Argentina has eaten into its reserves as the government fights to defend the local currency amid a shortage of hard currency inflows.

The peso has come under increased pressure since Argentina defaulted on its debt again on July 31, tanking 11 percent against dollar on the black market to 14.210 per greenback. It is down almost 30 percent so far in 2014.

Tight currency controls compel many Argentines to buy dollars on the black market, which is widely seen as a truer rate of exchange than the official rate, which stood at 8.405 at the close of Wednesday’s trading.

Reporting by Maximiliano Rizzi and Richard Lough; Editing by Diane Craft

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