BUENOS AIRES: Argentina's peso strengthened on Thursday, buoyed by central bank moves to encourage more domestic deposits, snapping a recent plunge that has seen the currency trade at its weakest ever level against the dollar.

The uptick in the peso came after the bank announced new measures to allow banks to invest more in high-interest Leliq short-term notes, which should boost peso deposits by encouraging higher rates for depositors.

The central bank said in a memo banks could buy an amount of Leliq notes equivalent to 100 percent of their total peso deposits, up from a previous limit of 65 percent.

This should incentivize lenders to pay depositors better rates to increase peso deposits in banks, which could then be channeled into Leliqs currently paying an average annual interest rate above 68 percent.

"This strategy is an incentive for retail investors to maintain their positions in pesos and not end up migrating to the dollar," Martin Saud, a trader at Argentine financial firm Balanz Capital, said of the new measures.

The peso strengthened 1.4 percent to 43.3 per U.S. dollar after opening 0.11 percent weaker, traders told Reuters. The currency had tumbled 2.9 percent on Wednesday to post an all-time low close of 43.90 per dollar.

The central bank's first of two daily auctions of short-term Leliq notes on Thursday offered an interest rate of 68.237 percent. The Leliq sales help the bank mop up funds in the market to bolster a weak peso and bring down stubborn inflation.

Carlos de Sousa, a senior economist at Oxford Economics, said the move was an attempt by the central bank "to improve the monetary transmission mechanism between its policy rate (the Leliq) and interest rates on deposits".

He pointed to the wide gap, which has been growing, between the Leliq benchmark rate and Badlar rates paid to depositors.

The peso is coming off two days of brutal losses as concerns mount over inflation, recession and an upcoming presidential election in Latin America's No. 3 economy.

The peso, which lost half its value against the dollar last year, has been one of the worst-performing currencies in 2019, losing over 14 percent since the beginning of the year. It has tumbled more than 10 percent this month.

Argentina's central bank and Treasury have signaled a more hawkish stance over the last month, looking to tighten monetary policy in order to tame inflation and protect the peso, which analysts said should limit the recent weakness.