Argentina scrapped some of its currency controls a day after devaluing the peso as policy makers sought to stem a financial crisis and restore investor confidence by reversing measures that drove foreign reserves to a seven-year low.

Bonds fell and the cost to insure the South American nation's debt against default soared to a three-month high as traders bet the move could backfire and lead to further dollar outflows. The peso dropped 1.5 percent, to 8.0014 per dollar, at 3:34 p.m. in Buenos Aires, extending its plunge this week to 15 percent, the worst selloff since a devaluation that followed the country's record sovereign default in 2001.

The currency market overhaul is the latest, and boldest, measure tried by President Cristina Fernandez de Kirchner as she seeks to win back investors, regain access to international debt markets, shore up a faltering economy, and curb inflation that soared to 28 percent last year. The increase to 23.8 percent in the annual cost to protect the nation's debt against default makes it the most expensive in the world.