Buenos Aires (AFP) - Argentina's currency crisis worsened dramatically Thursday as the peso plunged 11.1 percent against theLeo US dollar, its depreciation picking up pace in the sharpest one-day fall since 2002.
Amid growing capital flight, the central bank appeared to drop any effort to defend the peso, letting it fall to 8.01 to the US dollar from 7.1 late Wednesday -- when the currency lost 3.2 percent of its value.
That took the currency's depreciation so far this year to nearly 19 percent, creating deeper challenges for the government wrestling with falling foreign reserves and mounting inflation.
The peso also fell on the black market, though not as fast, slipping to 12.5 per dollar.
The Central Bank of Argentina appeared not to be willing to defend the currency, after having spent about $120 million to hold it up on Tuesday.
The central bank had rigidly enforced an official exchange rate over the past 10 years, but the peso has slid steadily since last year.
Meanwhile, the country's foreign exchange reserves have plummeted, down from $52 billion in 2011 to $29 billion now.
The bank has tried to stanch currency flight in the face of surging inflation that, according to private sector estimates, rose to 28.4 percent last year.
"What we are seeing is a change in strategy which aims to dramatically accelerate the devaluation, in more of a 'shock' style rather than gradually," said analyst Juan Pablo Rondero.
"The acceleration of the devaluation will have a ceiling, when the rate hits a level decided by the central bank. But we don't know what that is," said Rondero, who works for Abeceb.com.
Some businesses, notably exporters, had sought a lower peso to bolster the competitiveness of Argentine products on the global market.
The country is a major provider of grains like wheat and soybeans, and other farm products like beef, to global markets.
It also exports oil and automobiles.
But without knowing where the exchange rate is going, farmers will hold back on selling crops for export, waiting for a better rate.
But the cheaper peso makes imports, including fuels and inputs to manufacturing, more expensive.
Former central bank governor Alfonso Prat Gay said the devaluation will accelerate inflation, which the government adamantly says is only 11 percent but private sector economists put at 28 percent last year.
He blamed the policies of Axel Kicillof, the economist who was named Minister of Economy in November.
"Everything that the new minister has done has the effect of increasing inflation," he said.
Meanwhile the government has tightened controls on shopping abroad via the internet, to slow the outflow of currency.
On Wednesday it announced that Argentines could only make two purchases a year worth no more than $25 each, otherwise they will be taxed at a 50 percent rate.