Argentine peso floats, sinks

February 11, 2002 Posted: 1620 GMT

BUENOS AIRES, Argentina (Reuters) -- Argentina's peso fell in its first full day of floating in currency markets Monday, sending stocks sharply lower as well as investors worried the country's financial crisis may render their savings worthless.

Traders said the peso fell to about 2.25 to the dollar in the foreign exchange market, well below its level of about two to the dollar on Feb. 1, the last time the peso traded briefly in currency markets before a week-long ban on activity.

Meanwhile, stocks sank. The leading MerVal stock index fell about 3 percent to 440 in early trading. Decliners included energy group Perez Companc, off 4.7 percent to 2.61 pesos.

Monday was the first day the peso traded purely as a floating currency after the government ditched a stronger fixed rate of 1.40 pesos to the dollar that was used for exports for just over a month after January's devaluation.

Many investors fear the peso, which has lost about 56 percent of its value against the U.S. dollar since being devalued, could tumble out of control and spark steep inflation as Argentina slogs through a deep four-year recession.

A partial freeze on bank deposits in place since December to halt a run was expected to keep liquidity low and thus prevent a massive depreciation.