Argentina sold some $900 million of its dollar reserves last month to avert a steep drop in the peso, but officials and analysts say the country still has enough cash to protect itself from unexpected shocks. The central bank's foreign reserves dipped below the psychologically important $50 billion level on Thursday for the first time in 13 months.
They have dropped 5 percent since hitting a record $52.7 billion in late January, mainly because the government is using the reserves to repay its dollar debts. The funds have also been depleted by a shrinking trade surplus and capital flight, which private economists say sped past last year's total during the first seven months of 2011.
Typical election-year jitters were prompting private investors to buy greenbacks ahead of an October 23 vote in Latin America's No 3 economy. But President Cristina Fernandez's landslide win in an August primary made it clear she is virtually assured a second term in office.
Since then, investors have sought dollars because they believe the central bank will allow the peso to depreciate at a faster pace after the election - something which officials deny - and because of concerns over the possibility of another global recession.
Central Bank President Mercedes Marco del Pont said capital outflows were likely to remain strong in the third quarter. "They accelerated in the third quarter and we expect this trend will probably continue until October and then decelerate in the fourth quarter," Del Pont told reporters this week.
Argentina's central bank has a managed float exchange-rate policy. It intervenes nearly every day in the interbank market to avoid sharp swings in the peso's value. In August, the peso shed 1.3 percent against the dollar in formal interbank trade, despite central bank dollar sales estimated at a hefty $900 million.
Marco del Pont said there had been no change in strategy, with the intervention aimed as usual at avoiding volatility. But when Argentines get a whiff of a depreciation, they tend to rush out and buy dollars - turning the downward pressures into a self-fulfilling prophecy. "Argentina can't accumulate more (reserves) because dollars aren't coming in, we're seeing net outflows instead," said Federico Cohen, an analyst at Fundacion Capital.