Argentina President Cristina Fernandez
A file photograph of Argentine President Cristina Fernandez de Kirchner.Reuters

Argentine President Cristina Fernandez has signed a new bill, drafted to allow Buenos Aires to pay all its creditors in defiance of a US court ruling that forced the country into default, into law.

Fernandez's leftist government is determined to make a $200m (£123m, €155m) coupon payment due on 30 September, to prevent the default spreading across bond series -- which could raise the risk of investors calling for urgent payment on the principal value of their bonds.

But she needs to route the funds through channels beyond the reach of US Judge Thomas Griesa who ruled that Argentina must first resolve a legal fight with a group of New York hedge funds, over unpaid debt from a 2001 default, before paying the other bondholders.

If Argentina fails to make the payment to holders of its foreign currency-denominated Par bonds, the risk of creditors declaring their bonds' principal value and interest due immediately - known as acceleration - will rise, Reuters reported.

Earlier, the Argentine Congress voted in favour of the draft law that enables Buenos Aires to offer creditors the option to exchange bonds issued within the jurisdiction of New York for those issued in Argentina or another jurisdiction.

Fernandez and Economy Minister Axel Kicillof maintain Argentina is not in default and that the government will continue to service its obligations.

They have accused Griesa of overstepping his bounds.

Argentina was pushed into its second default in 12 years after Griesa barred trustee Bank of New York Mellon from handing over a June interest payment to bondholders.

The ruling prevented Buenos Aires from paying its overseas debt until the nation compensated billionaire Paul Singer's Elliott Management and other holdout US investment funds from its 2001 default.