Argentina to renew, expand China currency swap line

BUENOS AIRES, June 2 (Reuters) - Argentina has signed a deal to renew and potentially expand its currency swap line with China, the South American country's central bank said in a statement on Friday, a boost to the indebted nation's dwindling foreign currency reserves.

The bank said that the two countries had agreed to renew the total 130 billion yuan ($18.36 billion) swap line for three more years, and could double the freely accessible part of the swap from 35 billion yuan now to 70 billion yuan, some $10 billion.

"The procedure has begun to increase the usable amount by another 35 billion yuan," Argentina's central bank said following a meeting between officials in Beijing.

"This increase will come into effect once the first tranche of the extension used for commercial exchange between the two countries is exhausted and with the agreement of the parties."

The country's foreign currency reserves have fallen sharply this year due to a historic drought that slashed grains exports, the main source of dollar revenue, and the peso currency has weakened under the weight of 109% annual inflation.

Ahead of general elections in October, the government is working to rebuild reserves in order to make payments and cover trade costs, as well as to meet economic targets under its $44 billion loan program with the International Monetary Fund (IMF).

($1 = 7.0820 Chinese yuan renminbi)