UPDATE 3-Moody's cuts Argentina bond rating, says reserves in 'semi-freefall'
March 17 (Reuters) - Moody's Investors Service cut Argentina's government bond rating further into junk on Monday, saying a sharp drop in central bank dollar reserves has raised concern about the country's ability to service foreign debt.
The credit ratings agency downgraded the rating to 'Caa1' from 'B3,' and revised its outlook to stable from negative.
A major driver behind the decision to downgrade came from tumbling levels of foreign exchange reserves, which Moody's analyst Gabriel Torres called a "semi-freefall."
"What we're going to be looking at more than anything now is reserves," said.
"If Argentina enhances its funding options, whatever that may be - from tapping markets, to greater bilateral lending, to greater capital inflows, to whatever the options are that make it easier for them - then those are all credit positive actions," Torres said.
The country's reserves have plunged to $27.5 billion from a high of $52.7 billion in 2011, according to Moody's.
Argentina has been cut off from international capital markets since its 2002 sovereign bond default, while other potential investment has been chased away by high inflation.
The central bank uses its international reserves to make payments on the government's foreign debt, finance imports and prop up the overvalued peso currency through regular interventions in the foreign exchange market. Continuación...