Argentina facing devaluation blow

A HUMILIATING devaluation of Argentina's currency is looking inevitable despite draconian bank controls aimed at staunching an exodus of deposits and preventing a collapse of the country's financial system.

Under emergency banking restrictions which come into force today, Argentines will be able to withdraw only $250 (£176) a week in cash from each bank account, or a maximum of $1,000 a month. The government also imposed limits on the transfer of funds abroad.

The restrictions, which will be enforced for 90 days, came after panicking Argentines lined up for hours on Friday to withdraw cash, worried that their savings could be frozen as the government carries out a massive debt restructuring to trim interest costs on its $130bn debt mountain. The banking system lost more than $1bn in deposits on Thursday and Friday.

But experts judged that the measures would fail to save the peso's heavily-defended peg to the dollar. 'The measures are the strongest signal yet that the exchange rate peg's days are numbered and that, come 1 January, there is a strong probability of either a full dollarisation or a devaluation,' said Pedro Tuesta at analyst 4Cast.