Uruguay floats the peso

Uruguay's economy, dependent largely on banking, tourism and agriculture, has been battered by a run on bank deposits and a dive in consumer spending this year due largely to spill-over from Argentina's four-year recession.

"Starting today we are going to switch to a flee-floating exchange rate regime," Economy Minister Alberto Bension said. "The exchange rates of our two neighbours are heaping major uncertainty on us," he added.

The decision by Uruguay -- which could see its currency quickly plummet in value when trading resumes on Thursday -- comes as worries mount among investors that Argentina's deep crisis is slowing rippling throughout the region. The currency closed on Wednesday at 17.175 pesos to the U.S. dollar.

Under Uruguay's currency band system, the central bank intervened in the market to keep the currency trading within a certain range. Uruguay's previous system of controlled devaluations had left its exports unable to keep pace with major trading partner Argentina, where the peso has fallen more than 70 percent since January.

Worried over the impact of Argentina on Uruguay, The International Monetary Fund said its management has recommended increasing aid to Uruguay by $1.5 billion.