Argentina props up ailing peso

People are queuing up to convert pesos into dollars

Argentina's Central Bank is thought to have intervened in the currency markets to support the ailing peso.

The Argentine currency - which was floated freely for the first time last month - fell sharply against the dollar on Wednesday.

The struggling peso weakened by over 3% to an all-time low of 2.6 to a dollar.

Traders said that the Central Bank had come into the market selling dollars to try and prevent a further collapse.

The free float of the peso, together with its devaluation, is part of a restructuring plan after an economic crisis caused bloody street protests when the former government defaulted on debt payments late last year.

Desperate for aid

New fears over the currency came as hopes were dashed that the International Monetary Fund (IMF) would quickly grant new aid to Argentina.

The IMF's Managing Director, Anne Krueger, said that no new money was likely unless the government makes some major policy shifts.

"Obviously, we are not going to be able to lend into a situation where they continue having the same difficulties," Ms Krueger told reporters.

And US President George W Bush said that Argentina still needed to make "tough calls" to rein in spending.

Mr Bush's comments came as Argentina's president, Eduardo Duhalde, flew to a United Nations meeting in Mexico to plead for IMF funds.

Mr Duhalde had been hoping that a tough new austerity budget would be enough to woo the IMF into fresh lending.

Inflation fears

The peso's peg to the dollar ended a decade when the two currencies were interchangeable.

Since the currency was devalued in January, it has lost 60% of its value against the dollar.

And this has caused fears of an inflationary spiral and renewed social unrest.

There have been daily street protests during much of March, but not of the violent scale seen at the end of last year.