Argentina lifts restrictions on buying foreign currency

Argentina on Friday lifted restrictions in place since 2011 that limited the purchase of foreign currency, a day after the peso suffered its worst single-day dive since the 2002 financial crisis. The government has decided "to authorize the purchase of dollars for holding or savings," said Jorge Capitanich, President Cristina Kirchner's cabinet chief. The restrictions had always been temporary and had served their purpose, said Capitanich, adding that the change would take effect beginning Monday. He added that at a rate of 8.01 pesos to the dollar, the peso "has reached a level acceptable to the objectives of economic policy convergence". The peso plunged by more than 11 percent against the dollar on Thursday. The move came with the Argentina in the throes of a major economic crisis, amid growing capital flight and a currency whose value so far this year has plummeted by nearly 19 percent. Earlier this week, the government moved to cut back spending abroad by Argentinians, to stem the drain on reserves. The government restricted purchases from abroad made over the Internet to two a year, at a maximum value of $25 each, above which it would impose a 50 percent tax. The Central Bank of Argentina had rigidly managed the official exchange rate over the past several years. But that has had a steep cost to foreign exchange reserves, which have dwindled to $29 billion currently from $52 billion in 2011 -- at a time when most developing countries have been able to pile up reserves on strong capital inflows. Despite the central bank intervention, the peso has slid steadily since last year. And after spending about $120 million to shore it up on Tuesday, the bank appeared to abandon those efforts to protect its stockpile of dollars.