(Adds context, quote from president's speech)

By Jorge Otaola and Nicolás Misculin

BUENOS AIRES, Oct 1 (Reuters) - Argentina's central bank chief resigned on Wednesday after a long tussle with the economy minister and was replaced with a regulator seen as sympathetic to the interventionist stance of a government fighting one of the world's highest inflation rates.

Juan Carlos Fabrega had argued for tighter anti-inflation policies and opposed the government's heavy fiscal spending, but ran up against the powerful economy minister, Axel Kicillof, who pushed to boost growth in the stagnating economy.

Argentine debt prices fell on the news Fabrega had stepped down.

Alejandro Vanoli, head of Argentina's markets regulator, will take over as the central bank chief, a spokesman for leftist President Cristina Fernandez said.

Fernandez has scaled up her interventionist policies in Latin America's No. 3 economy since it defaulted on its foreign debt in July, intensifying capital flight and piling pressure on shrinking foreign reserves and the peso currency.

In a fiery speech on Tuesday, Fernandez publicly suggested that the central bank had failed to prevent commercial banks from driving the peso lower.

"Fabrega handed in his resignation this afternoon in a way that was impossible to decline," a source at the central bank told Reuters.

Argentina's local U.S. dollar-denominated bonds shed around two points on the news, with the Bonar 2017s sliding from around 88.40 to 86.75 and the Boden 2015s dropping from 91.75 to 90.0, according to brokers.

Rumors earlier that Fabrega would quit sparked a sell-off on the Merval stock index. It closed before the resignation was confirmed, losing 8.2 percent on the day.

Private economists estimate inflation is running as high as 40 percent in Argentina and policymaking had become increasingly erratic as Fabrega's central bank got sucked into a tug-of-war with Kicillof.

"Fabrega has been seen as the more orthodox side of the administration, and his departure will be negatively perceived by the market," said Alejo Costa, chief strategist at local investment bank Puente.

"Not a good sign," echoed Goldman Sachs analyst Alberto Ramos. "Fabrega was perceived to be a moderating voice and someone that really understood financial market dynamics."

'MORE UNCERTAINTY'

Fabrega was appointed in November last year. His supporters credit him with overseeing a sharp but orderly devaluation in January that Kicillof had opposed on the grounds it would hurt consumer demand. It was Fabrega's first and last major policy win over the economy minister.