By Taos Turner for online.wsj.com
BUENOS AIRES (Dow Jones)--Argentina's central bank over the weekend made it easier for banks to release U.S. dollar deposits just as demand for dollars appears to be surging.
The Central Bank of Argentina will now require banks to keep just 20% of their dollar deposits on reserve at the monetary authority, compared with 100% of unused deposits previously.
On Friday, the central bank said customers had withdrawn $645 million in dollar deposits during the first week after a government decision to crack down on dollar purchases.
The imposition of strict controls on Argentina's currency market has made many people nervous, leading both individuals and companies to seek more dollars as a hedge against fears that the country's currency, the peso, will weaken abruptly.
Government officials say the currency controls aim to curb money laundering. But many analysts and investors say the real aim of the limits on dollar purchases is to stem capital flight that has cut central bank reserves to $46.57 billion from $52 billion in early August.
Private-sector banks held $14.833 billion in dollar deposits before the currency controls were imposed on Oct. 31, according to the central bank. Five days later that had declined by 4.3% to $14.188 billion.
Economists say the currency controls themselves are contributing to the drain on central bank reserves. That's because of the way the bank calculates its reserves, which includes a measure of how many dollars are deposited in the country's banking system.
-By Taos Turner, Dow Jones Newswires; 5411-4103-6728;
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source: http://online.wsj.com
