Creditors who own bonds left over from Argentina’s default in 2001 are growing increasingly confident the government will negotiate once a clause that it says prevents a settlement expires next month, Bloomberg Businessweek reported. The dollar-denominated notes rose as high as 120 cents on the dollar, according to prices compiled by Exotix USA Inc., which specializes in illiquid and distressed emerging-market debt. That’s the highest since July 30, when Argentina defaulted on securities issued in debt restructurings in 2005 and 2010.

Argentina's debt default spread to its Par bonds on Friday after the country failed to complete an interest payment, raising the risk that creditors could demand that the country's cash-strapped government immediately repay all of its debt. Argentina deposited a $161 million payment with a newly appointed local trustee last month to try to circumvent U.S. court orders for it to settle with "holdout" investors. The holdouts are suing to get full repayment of bonds from a 2002 default before holders that accepted the terms of a debt restructuring get paid by the government.

Argentina’s central bank tapped a currency swap line with its Chinese counterpart for the first time Thursday, requesting the equivalent of about $814 million at a time when its hard currency reserves are under pressure, The Wall Street Journal reported. Argentina and China agreed to the 70 billion yuan currency swap during a state visit by Chinese President Xi Jinping in July. Argentine officials say the agreement will make it easier for Chinese companies to invest in Argentina and strengthen the central bank’s depleted reserves.

Argentina's central bank chief resigned on Wednesday after a long tussle with the Economy Ministry and was replaced with a regulator considered sympathetic to the interventionist stance of a government battling one of the world's highest inflation rates, Reuters reported. The move drew a sharp negative reaction in financial markets, with the price of Argentina's local U.S. dollar-denominated bonds skidding.

A U.S. judge held Argentina in contempt of court on Monday, saying the republic was trying to find ways to circumvent a prior order requiring it pay holdout bondholders at the same time as other creditors who restructured their debt in recent years, Reuters reported. U.S. District Judge Thomas Griesa in Manhattan deferred a decision on imposing sanctions against Argentina to a later date. But he did say that the "problem is that the republic of Argentina has been and is now taking steps in an attempt to evade critical parts of" his injunction.

In its latest attempt to circumvent US courts, Argentina will seek to pay nearly $200m due on its restructured bonds by disbursing the money to investors next week via a local bank instead of Bank of New York Mellon, its trustee, the Financial Times reported. In response, holders of the country’s defaulted bonds have asked US District Judge Thomas Griesa to find the nation in contempt of court and fine it $50,000 for seeking to evade legal rulings that require Argentina to pay them in full if it also services its restructured debt.

Argentina’s battle with holdout creditors is taking on ever-broader dimensions as Cristina Fernández, the president, appeals for support from the UN this week after meeting billionaire George Soros and Pope Francis, the Financial Times reported. In New York, Ms Fernández hopes to recruit Mr Soros in her fight against the holdouts. His Quantum hedge fund holds a 3.5 per cent, or $450m stake, in YPF, the national oil company that would benefit from renewed access to international credit.

Argentina is holding a gun to the head of Citigroup, a lawyer for the bank told a three-judge panel in Manhattan on Thursday, the International New York Times DealBook blog reported. The bank has found itself in an awkward position: It must decide between defying a New York court order or a sovereign government, a move that it says would result in “grave sanctions” from Argentina. “We’re going to obey, and if we obey, we have a gun to our head and the gun will probably go off,” Karen Wagner, a lawyer representing Citigroup, said.

Argentina's Congress on Thursday passed a new bill designed to enable the government to resume debt payments to bondholders in defiance of a U.S. court ruling which tipped the country back into default, Reuters reported. President Cristina Fernandez's leftist government is in a race against the clock to make a $200 million coupon payment due on Sept. 30 to prevent the default spreading across bond series, which could raise the risk of investors calling for immediate payment on the principal value of their bonds. But she needs to route the funds through channels beyond the reach of the U.S.

Argentina is tightening its grip on the country’s currency market as international reserves decline following its second debt default in 13 years, Bloomberg News reported. Argentine banks must now seek government authorization for dollar purchases of $150,000 or more, down from a previous threshold of $300,000, according to three bank officials with direct knowledge of the matter. Central bank officials communicated the measure through telephone calls and instant messages to currency traders yesterday, two of the people said.