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March 24 (Reuters) - Fitch Ratings on Friday cut Argentina's foreign currency rating to "C" from "CCC-" citing an "imminent" default after the country ordered public sector bodies to sell or exchange their holdings of some sovereign dollar bonds.
A presidential decree said on Thursday that public sector bodies would have to sell or auction five local law dollar bonds maturing between 2029 and 2041, and to swap six foreign law dollar bonds for peso debt.
The "C" rating reflects an imminent default as the presidential order would involve one-sided exchanges and forced currency conversions, Fitch said. Once the exchanges are executed, the rating will be lowered to Restricted Default.
"These measures merely give the government some temporary breathing space and fail to address the fundamental issue that the peso is too strong," said Kimberley Sperrfechter, emerging markets economist at Capital Economics in a note, calling it "yet another desperate attempt to support the peso and ease pressure on FX reserves."
Fitch also said Argentina's long-term local currency credit rating is affirmed at "CCC-" as peso-denominated securities are not affected by the decrees, but "repayment capacity remains highly compromised."
The International Monetary Fund said on Thursday it was assessing Argentina's debt exchange announcement in accordance with the objectives of their $44 billion debt program.
Moody's had said Argentina's $1 billion dollar debt repurchase announced in January was effectively a default, while S&P Global and Fitch stopped short of calling it that.
In October, Fitch downgraded the country's long-term sovereign credit rating to "CCC-" from "CCC", citing deep macroeconomic imbalances and rising risks over Argentina's ability to meet future debt repayments. (Reporting by Shivansh Tiwary in Bengaluru and Rodrigo Campos in New York; Editing by Shounak Dasgupta and Alistair Bell)