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UPDATE 1-Argentine markets steady as anti-government protesters gather

Adam Jourdan and Jorge Otaola

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BUENOS AIRES, Sept 4 (Reuters) - Argentina's peso held steady on Wednesday while bonds edged up with newly imposed capital controls helping stabilize haywire markets, even as anti-government protesters gathered in Buenos Aires amid rising inflation forecasts and a deepening recession.

The peso currency was virtually flat in early trading at 56.1 per U.S. dollar, after rising sharply on Tuesday as Wall Street cheered President Mauricio Macri's capital controls aimed at protecting the beleaguered markets.

Argentine bonds and the peso have plumbed record lows since Peronist Alberto Fernandez soundly beat Macri last month by in a primary election, dashing the president's hopes of reelection in October.

The result sparked a market crash that saw the peso lose 26% of its value against the dollar in August. The country risk index soared and bond prices hit record lows.

In response Macri, who came to power in 2015 as a free-market champion and critic of interventionist policy, has rolled out plans to push back payments on around $100 billion of debt and imposed capital controls to protect the peso.

While markets have stabilized, the country's economic outlook has darkened. A central bank poll of economists hiked its inflation forecast for the year to 55% on Tuesday, and cut its outlook for the economy which it now expected to shrink 2.5%.

Anti-government protesters are expected to descend on the capital Buenos Aires on Wednesday to demonstrate against austerity measures that have sapped growth and driven millions of people below the poverty line.

South America's second largest economy has been in a biting recession since last year when a debt crisis hammered the peso currency and drove inflation up to 50%. (Reporting by Adam Jourdan and Jorge Otaola Editing by Chizu Nomiyama and David Gregorio)