"If the exchange rate breaks the psychological level of 50 to a dollar, we could see a breakaway movement in the currency, and I don’t know what will happen to us by then," said KGI Securities vice president Fitzgerald Aclan.
At yesterday’s trading at the Philippine Dealing System (PDS), the peso closed at 49.650, down a hefty 44.50 centavos from Tuesday’s close of 49.205 to the dollar. Yesterday’s trading ranged from a high of 49.270 to a low of 49.800 to the dollar. Volume of transactions amounted to $155 million.
Traders had been looking at the 49.45 to $1 mark as an immediate support–a level that was easily breached in early trade yesterday.
"Given the political crisis, the market is still jittery," a trader from a local bank said.
Strong offshore demand for the dollar also conspired against the peso, traders said. Another trader said the peso had decoupled from the Thai baht, which was recovering after also falling to new lows.
"The weakness of the peso is more locally driven. Looks like there’s no end in sight, the political uncertainty is dragging on. Nobody wants to get caught flat-footed," the trader said.
Other dealers said talks of another oil price increase fueled corporate demand for dollars.
The peso has been rewriting record lows practically every day in recent weeks on allegations President Estrada received millions of dollars in bribes from illegal gambling operators. Mr. Estrada is facing impeachment charges in the House of Representives.
Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura admitted that the BSP had to intervene in the foreign exchange market, but did not say how much it unloaded yesterday.
Dealers, however, said the BSP provided, through a conduit bank, about $60 million or nearly 39 percent of total turnover volume of $155 million.
The BSP had raised the reserve requirement of banks, jacked up its overnight rates and sold dollars on the spot market, but all to little avail.
Last week, the BSP said it was considering raising again its key overnight rates to support the weakening peso but decided against it on Tuesday.
Traders said the BSP’s decision to hold off on any rate hikes probably contributed to the peso’s weakness.
Buenaventura to attributed the weakening of the peso against the dollar to the "over-reaction" of the market.
He did not cite regional factors as the Thai baht had improved supposedly due to heavy intervention by the Thai Central Bank.
The BSP chief continues to keep mum on possible measures the BSP will take to stop speculation against the peso.
The market expects the local currency to breach the 50 to $1 level today and the new benchmark is being set at 52 to $1.