Traders said the peso’s sharp recovery was triggered by the resignation of the much-vaunted economic team of President Estrada as well as the turnaround of Armed Forces of the Philippines chief of staff Gen. Angelo Reyes. It was largely believed that the President‘s resignation would just be a matter of fine.
At the Philippine Dealing System (PDS), the peso opened at 54.50 and appreciated to as much as 47 versus the greenback in mid-day trading before settling at 47.50, or close to its pre-jueteng scandal level.
Currency traders said the foreign exchange market reacted positively to news that most members of President Estrada’s economic team abandoned ship, along with the defection of one of his Cabinet secretaries, Defense Secretary Orlando Mercado, Reyes and other top brass of the military and police.
Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura who has a fixed term until 2004 and who is staying, confirmed the resignation of Finance Secretary Jose T. Pardo. Pardo in turn, confirmed the resignation of Economic Planning Secretary Felipe Medalla, Bureau of Treasury head Leonor Briones and Bureau of Internal Revenue head Dakila Fonacier.
"It’s what I’ve been saying earlier. We have been paying a premium for the political risks. The market always accepts public rallies, but is when it comes with violence that makes the difference. When they see that it is violent, then it somehow creates instability in the market," Buenaventura explained.
The BSP chief admitted that news of Reyes’ defection was one of the reasons why the peso appreciated for the first time since Wednesday. He said the wide spreads in the quotation were not influenced by the BSP but was purely-market driven.
Buenaventura said he expects the peso’s movement to strengthen and follow fundamentals, something which was not possible in the last few days as the peso’s fall was due to a jittery market looking for a political solution to the crisis.
"We are looking at 47 to 49 where we were all along," Buenaventura said.
Traders said most banks and corporates which are long on dollars dumped the greenback as the peso steadily moved up, wanting to cut their losses.
"Most of the players were simply waiting for the clouds to clear up that’s why dollars were snapped up in the previous days, but now that there is hope, they may unloaded their dollars," one trader said.
Another trader said the peso’s rise reflected market sentiment, "which was basically wanting and looking for a political solution to the country’s crisis," adding the defections gave hope that Mr. Estrada will pay heed to the public’s clamor for him to step down.
Some traders, however, still want to be cautious, warning the peso’s recovery could be short-lived if President Estrada holds out along with his loyal followers, or if there is a violent confrontation between loyal forces and the military, and between anti-Estrada followers and pro-Estrada followers.
"The volatility has lessened, if he (Estrada) steps down, it will even be better because it will be good for the peso," a trader from a foreign bank added.