For full coverage, double-click on [ID:nN06209372]
* Government says Redrado's term over after court ruling
* Police stop bank chief Redrado from entering premises
* Bond prices edge up in light, cautious trade, peso flat (Adds president on commission, fresh trader quote, peso)
By Walter Bianchi
BUENOS AIRES, Jan 25 (Reuters) - The vice president of Argentina's Central Bank took charge of the monetary authority on Monday and bond prices stabilized as investors bet the leadership crisis at the bank would soon be resolved.
Vice President Miguel Pesce, an economist seen as close to the government, took over as interim chief a day after police barred Bank President Martin Redrado from the premises in a dispute over a government bid to use foreign reserves to pay debt.
President Cristina Fernandez sacked Redrado after he opposed her plan to use $6.6 billion in Central Bank reserves to service the public debt, but a court later reinstated him.
Redrado appeared increasingly isolated after being refused entry to the bank late on Sunday. He did not try to return to his office on Monday and both opposition and ruling party lawmakers said it was time for him to step aside.
"Redrado has served the country by defending the reserves," said Federico Pinedo, a center-right opposition deputy. "From now on, he can take a decision that helps us find a way out of this confusing process."
The government says a court ruling on Friday means Redrado's mandate is over.
The ruling said the government cannot appoint a new permanent Central Bank president before Congress gives its opinion on Redrado's fate, but the central bank board of directors named Pesce as the interim chief late on Friday.
Redrado said the ruling means he remains president of the institution, but the government, constitutional lawyers and opposition lawmakers interpreted it as saying he should go.
A special congressional commission is due to meet on Tuesday to debate Redrado's firing, although Fernandez has said any recommendations it makes will be non-binding.
Fernandez called for the process to be as "short and quick as possible" and local media said her allies in Congress were pushing for a conclusion to be reached within a day, although some commentators say it could take weeks.
DEBT SWAP
The conflict has rattled local financial markets and highlighted political uncertainty in Latin America's No. 3 economy just as Fernandez's cash-strapped administration seeks to woo investors with a $20 billion swap of defaulted debt.
Stocks <.MERV> closed down 0.44 percent at 2,321.20 points, but locally traded bonds edged up 0.1 percent on average in Buenos Aires in light, cautious trade.
"With the passing of the days, things are going to get back to normal and the calm in the bond market suggests that (Redrado's exit) is already decided," said Leopoldo Olivari, a trader at the Bacque brokerage in Buenos Aires.
The peso
"It was another calm day ... maybe somewhat removed from the dispute between Redrado and the government or counting on a resolution of the dispute in the near future," said Carlos Rizzo, an independent foreign exchange analyst.
The risk spread on Argentine bonds narrowed by 19 basis points to 737 basis points over comparable U.S. Treasuries according to the benchmark JP Morgan EMBI+ index <11EMJ> after jumping to 756 basis points on Friday.
Friday's court ruling also upheld a freeze on the president's bid to use part of the country's $48 billion in foreign reserves to create a fund, but government ministers have said the planned debt swap remains on track.
Some economic analysts say the debt exchange is not directly related to the fate of the reserves fund plan, meaning it should still launch next month despite the political tension.
"All of these events are adding noise to Argentina," said Carola Sandy, a sovereign analyst at Credit Suisse.
"It will make it more expensive for the government to do the swap, in the sense that they will have to give bondholders more, but I don't think it will have a huge effect on participation," she added. (Additional reporting by Walter Brandimarte and Guido Nejamkis; Writing by Helen Popper; Editing by Leslie Adler and Dan Grebler)