UPDATE 1-Argentina clinches extra $7 bln in IMF funds, sets band for peso

Argentina on Wednesday clinched an additional $7 billion in funding from the International Monetary Fund in an effort to ease investor concerns over its abilities to pay its debts and announced a trading band for its peso currency.

IMF Managing Director Christine Lagarde, speaking at a news conference in New York alongside Argentine Economy Minister Nicolas Dujovne, said the Fund would increase its lending programme with Argentina to a total of $57 billion, with "significant frontloading" of the disbursements until the end of next year.

Lagarde said that Argentina's central bank had agreed as part of the deal to allow the peso currency to float freely and would only intervene in the foreign exchange market in extreme circumstances.

"In the event of extreme overshooting of the exchange rate the central bank may conduct a limited intervention to prevent disorderly market conditions," she told a news conference.

Speaking at a later news conference in Buenos Aires, Argentina's new central bank governor Guido Sandleris said the bank would establish a trading band for the peso and only use foreign reserves to intervene in the market if it fell outside that range.

Sanderlis, who was appointed on Tuesday when his predecessor unexpectedly resigned, said the range will initially be set at 34 to 44 pesos to the U.S. dollar and it will be allowed to depreciate daily at a rate equivalent to 3.0 percent per month.

"This new monetary policy will allow us to reduce inflation and recover stability and predictability in prices that Argentina so badly needs," Sandleris said.

The Argentine currency has shed more than 50 percent of its value so far this year, as a drought hit its agricultural exports and tipped the economy into recession, raising fears over the government's ability to service its foreign debts next year.

The central bank has spent nearly $16 billion in reserves this year in a failed attempt to prop up the peso.

In an effort to ease investors concerns over Argentina's ability to pay its foreign debts, Lagarde said that the new deal would increase funding by $19 billion in 2019. Disbursements for the rest of this year would rise to $13.4 billion from $6 billion under the existing deal, she said.

Subject to IMF board approval, financing under the new deal would no longer be discretionary, but would be readily available to the government, Lagarde said.