BUENOS AIRES (Dow Jones)--Argentina’s central bank is spending hundreds of millions of dollars each week to prevent the country’s currency from weakening too quickly, two think tanks said in separate reports.

So far this year the monetary authority has spent about $2 billion to bolster the peso, say economists at the think tank Abeceb.com. Another report published Monday by Econometrica estimates that in March alone the central bank spent $1.862 billion to keep the peso from slipping.
“The currency drainage was constant during the entire month with the average weekly amount (spent by the central bank) totaling $418 million,” Econometrica reported.
Econometrica estimates that capital flight in the first quarter totaled $4.5 billion given that Argentina’s first-quarter trade surplus was $3 billion.
Despite selling dollars, the central bank’s reserves took only relatively a moderate hit in March. As of April 13, reserves totaled $46.339 billion, compared with $47.025 billion on the last day of February.
That’s partly because many of the people and companies that buy dollars from the monetary authority deposit them almost immediately in local banks. Banks, in turn, then take the dollars and deposit them with the monetary authority, doing so because they are often unable to lend the money.
“Even though the central bank sold $1.5 billion, around $600 million of that came back to the monetary authority in the form of deposits,” Econometrica said.
Another reason for the central bank’s relatively stable reserves, Econometrica says, is that the bank is likely borrowing money from elsewhere.
“Everything indicates that the central bank is borrowing funds from international lenders so that the decline in reserves doesn’t show up amid the capital flight,” the think tank reported.
Central bank officials say only that a number of variables - including assets values - affect reserve levels.
Private-sector peso deposits declined ARS2.22 billion ($600 million) in March as investors withdrew their pesos and traded them in for dollars. In many cases, these investors took the dollars and deposited them back into the banks in dollar accounts, completing the circle.
“This behavior reflects a certain degree of confidence in the financial system despite the capital flight,” Econometrica said.
The peso has come under heavy pressure amid increasing concern about a deepening economic downturn and political noise ahead of a June 28 congressional election.
The vote was originally set for late October. But Argentine President Cristina Fernandez convinced Congress - now controlled by her allies - to expedite it. The move was widely seen as a bid to avoid political fallout from the expected deterioration in the economy later in the year.
The date change prompted a selloff in the peso as fears grew over a post-election devaluation and a possible default on debt payments. Most analysts downplay the probability of the latter, but many economists think the government could let the peso depreciate quickly after the election.
“There’s going to be a lot of pressure to let the peso depreciate,” said Abeceb.com economist Gabriel Martini.
After weakening by around 7% this year, the peso strengthened for three consecutive days at the beginning of April as the central bank injected dollars into the market.
That, combined with an increase in the number of exporters who were liquidating dollars into the market, bolstered the peso. But Martini downplayed the peso’s rise.
“The peso has been stronger but that doesn’t change the trend,” Martini said. “I think the peso’s recent strength is a temporary blip. The trend isn’t going to change.”
Martini said that because of this the central bank is working around the clock to obtain additional funding from multilateral lenders like the World Bank.