The Argentine currency remained stable Monday after restrictions on the withdrawal of some $5.7 billion in bank deposits were lifted.
Following an initial rise in the exchange rate, as predicted by analysts and monetary officials, the U.S. dollar fell 0.82 percent compared to Friday's close to end the session at 3.63 pesos. In the currency market regulated by the Central Bank, the greenback remained stable at 3.55 pesos. Demand for U.S. dollars was moderate and banks operated normally without any massive withdrawal of funds. Hopeful that the lifting of banking restrictions would spur demand for U.S. currency similar to the feverish buying that occurred from January to June after the restrictions were imposed, scores of retirees and unemployed workers queued up in front of currency exchange shops and banks with the intention of later selling their places to people interested in purchasing dollars. The going rate for a place in a line was 20 pesos ($5.50) although it was noted that demand for foreign currency on Monday was similar to demand in the past several weeks. The lifting of the year-long financial restrictions, which severely curtailed the withdrawal of cash from checking and savings accounts, has freed some 21 billion pesos ($5.7 billion). Given the great sense of anticipation generated by the announcement of the lifting of banking restrictions, the currency markets as well as Central Bank chairman Aldo Pignanelli had anticipated a slight increase in the exchange rate. Shortly before banks opened, Economy Minister Roberto Lavagna forecast that activity would be "completely normal," and dismissed the likelihood of massive withdrawals. In that context, the drop in the exchange rate surprised even the most optimistic government officials. Analyst Aldo Abram told that "there was no reason" for a significant increase in the exchange rate since most account holders had opted to put their money in fixed-term deposits that were not under financial restriction. Meanwhile, comedian Nito Artaza, head of the association of Swindled Argentine Account Holders, said Monday's market stability "proves that the financial system is healthy and banks should give back the money they are still withholding." Referring to the dollar deposits that the government exchanged for pesos at a rate of 1.4 to the dollar early last January and which banks continue to withhold, Artaza said banks "should give back the fixed-term dollar-denominated deposits in the same currency." Judiciary officials recently said that the Supreme Court planned to annul the government order that converted dollar-denominated deposits into pesos. If so, the decision could spark another financial crisis because banks do not have the necessary amount of currency to cover the dollar-denominated deposits. It is estimated that banks are withholding some $13.6 billion in this type of deposit. Last week, the Central Bank chairman said that if the Supreme Court vacated the pesos-for-dollars order, the government would be forced to issue such a large amount of pesos that it would spark "hyperinflation