Argentina has lifted restrictions in place since 2011 that limited the purchase of foreign currency, a day after the peso suffered its worst single-day dive since the 2002 financial crisis.

The government has decided "to authorize the purchase of dollars for holding or savings," said Jorge Capitanich, President Cristina Kirchner's cabinet chief.

The restrictions had always been temporary and had served their purpose, said Capitanich, adding that the change would take effect beginning Monday.

He added that, at a rate of 8.01 pesos to the dollar, the peso "has reached a level acceptable to the objectives of economic policy convergence."

The move came with the peso in free fall, plunging more than 11% against the dollar yesterday.

The currency's fall has been precipitous, plummeting nearly 19% so far this year. 

Earlier this week, the government moved to cut back spending abroad by Argentines, to stem the drain on reserves. 

The government restricted purchases from abroad made over the Internet to two a year, at a maximum value of $25 each, above which it would impose a 50% tax.

The Central Bank of Argentina had rigidly managed the official exchange rate over the past several years. 

But that has had a steep cost to foreign exchange reserves, which have dwindled to $29 billion currently from $52 billion in 2011 - at a time when most developing countries have been able to pile up reserves on strong capital inflows.

And after spending about $120 million to shore up the peso yesterday, the bank appeared to abandon the effort to protect its stockpile of dollars.

The foundering economy has proven to be a major political liability for Kirchner, who has nearly two more years left in office.

A lawyer by training, she has faced rising criticism of her handling of the economy, including the critical shortage of hard currency.

The restrictions on the purchase of dollars allowed a parallel black market to flourish, where the greenback has been trading at almost 13 pesos.

The latest economic upheaval comes 12 years after Buenos Aires roiled finance markets by defaulting on nearly $100 billion in bonds, an earthquake which unleashed a tidal wave of capital flight and runaway inflation.

Kirchner has seen her approval rating slide to about 30% since she was swept back into office for a second term in 2011. Her term ends in 2015.

She has angered Argentina's business class through her failure to control inflation, her protectionist economics, import restrictions, the nationalisation of companies such as energy giant YPF, and her foreign exchange controls.

The poor, however, revere the Peronist president for her fight against poverty, generous social welfare programs and improved retirement pensions - even though Argentina's economy is sluggish and violent crime has been rising.