By Hugh Bronstein and Jorge Otaola
BUENOS AIRES, Aug 20 (Reuters) - Argentina's promises todefend its beleaguered peso gained credibility on Tuesday afterthe central bank poured $112 million of its reserves into dollarauctions, helping to boost the currency about 0.5% a day aftersteep losses.
In three interventions in the foreign exchange market, thebank acted in concert with statements from officials saying thegovernment's top priority was to stabilize the peso after itlost 18% of its value against the U.S. dollar last week.
"The interventions pushed the peso through the 55-per-dollarbarrier," to 54.50 pesos to the greenback, Gustavo Quintana,foreign exchange trader with Buenos Aires brokerage PRCorredores de Cambio, told Reuters.
The recession- and inflation-racked country was hit by awave of uncertainty following an Aug. 11 primary election inwhich business-friendly President Mauricio Macri got thumped bycenter-left Peronist challenger Alberto Fernandez, who emergedthe clear front-runner ahead of the Oct. 27 general election.
Minutes after being sworn in by Macri on Tuesday, TreasuryMinister Hernan Lacunza said the government will stand by thepeso and stick to its goal of erasing its primary fiscaldeficit, despite a series of tax cuts and spending measuresannounced last week aimed at spurring growth.
"We want to leave a solid economic platform for whichevercandidate wins" the presidential election, said Lacunza, formereconomy chief for Buenos Aires province. He told a pressconference that Argentina had a primary fiscal surplus in Julyand he expected a surplus in August as well.
Traders said the peso rallied to close at 54.74 perdollar after falling 1.2 percent in early trade. Localover-the-counter bonds and the Merval stock index remained innegative territory, still stung by the downgrade late on Fridayof Argentina's sovereign debt by ratings agencies Fitch andStandard & Poor's.
Monday was a holiday in Argentina, forcing investors to waituntil Tuesday to react.
Nicolas Dujovne, the former treasury minister, quit onSaturday, saying he believed the country needed "significantrenewal" of its economic team.
Macri, struggling to revive his campaign for a second term,is betting the new treasury chief can help stabilize theeconomy. Last week Macri, smarting from his primary electionloss, announced a cut in taxes on food and personal income alongwith increased welfare spending. The measures raised concern hisadministration will miss fiscal targets agreed with theInternational Monetary Fund as part of a $57 billion loan deal.
Fernandez told local radio he was concerned about the stateof government finances that he might inherit if he wins thepresidency and takes office in December.
Macri's emergency relief measures were creating "a fiscalhole," Fernandez said.
Those measures will have a slight negative fiscal effect,but not enough to further hurt the country's credit rating,James McCormack, Fitch's head of sovereign ratings, said onTuesday.
IMF WATCHING
"We are closely following recent developments in Argentinaand are in ongoing dialogue with the authorities as they work ontheir policy plans to address the difficult situation that thecountry is facing," the IMF said in a statement.
"An IMF staff team will travel to Buenos Aires soon," saidthe statement, which was signed by IMF spokesman Gerry Rice.
The IMF's next review of Argentina's economy on Sept. 15should provide a sign of whether the lender of last resort stillthinks the country can pay its debt obligations. Governmentbonds denominated in dollars are harder to pay when the pesoweakens.
A crunch point will come in the second quarter of 2020, whenArgentina is scheduled to make $20 billion in debt repayments,up sharply from $5.6 billion in the first quarter of next year.
Central bank chief Guido Sandleris told reporters on Tuesdaythe bank would continue to sell reserves in an effort to haltthe peso's slide.
Including last week's interventions, the bank had auctionedoff $615 million in dollar reserves as of Tuesday afternoon,traders said.(Reporting by Hugh BronsteinAdditional reporting by Cassandra Garrison, Walter Bianchi andHernan NessiEditing by Chizu Nomiyama, Paul Simao and David Gregorio)