December 2, 2008 / 4:56 PM / 10 years ago

Argentine peso nears 7-year low on dollar demand

BUENOS AIRES, Dec 2 (Reuters) - Argentina’s peso currency weakened on Tuesday to its lowest level against the dollar since a sharp devaluation in early 2002 as savers and companies opted for safe-haven greenbacks.

The global financial crisis has raised demand for dollars in Argentina in recent months, leading the central bank to sell hundreds of million of dollars from its foreign reserves to stop the peso from falling more sharply.

However, currency traders said on Tuesday although the central bank was intervening in the market, it appeared to be allowing the peso to weaken.

In afternoon interbank trade, the peso was down 0.44 percent at 3.395/3.3975 per dollar ARS=RASL, breaking October's 3.39 low to touch its weakest level since the devaluation of the 2001/2002 economic crisis.

In informal trade between foreign exchange houses ARSB, the peso was down 0.66 percent at 3.425/3.43 per dollar.

Traders said fears of a global recession were responsible for the increased demand for dollars.

“There’s a lot of uncertainty and fear (and) faced with so much financial insecurity, people are used to fleeing to the safety of the dollar,” said one currency trader.

Most of the dollar demand was from banks, investors and importers, with grains exporters responsible for most of the dollar sales.

In the last five months, a sharp fall in global prices for grains such as soybeans and corn has reduced the amount of dollars being sold in the local market by exporters.

Prices of soybeans, Argentina’s top crop, have fallen about 50 percent since hitting a record high in July. (Reporting by Jorge Otaola; Writing by Helen Popper; Editing by James Dalgleish)

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