Peso to stabilize this week — Buenaventura

Even with slower dollar inflows, the badly-battered peso is expected to stabilize at current levels this week, Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura said.

"We are hoping it will stabilize at … slightly below P52 given that other currencies in the region have also weakened," Buenaventura said, stressing that despite the accelerated depreciation of the peso versus the US dollar in the past few weeks, "there has been no capital flight."

"There was a bit of churning or movement of dollars among banks, but there was no capital flight," Buenaventura said, dismissing rumors last week that there was huge demand for dollars in the Filipino-Chinese dominated Binondo area, as residents, wary of the resumption of random kidnappings, were reported to be relocating to safer cities outside the country.

Buenaventura said however, that because of the peso’s weakening, people are trying to maximize their returns, while some corporates are hedging on the dollar as a result of the spate of bad news.

Despite the rather fast depreciation of the peso compared to other currencies in the region in the past few weeks, Buenaventura said the peso is still on line or on track, and is in fact, in better shape than other currencies which have depreciated at a faster rate.

Buenaventura said that since the year began, the Indonesian rupiah depreciated by 14.73 percent, while the Japanese yen weakened by 8.02 percent versus the greenback. The Thai bath feel 4.14 percent, the Australian dollar dropped 7.63 percent and the Euro money fell by 9.59 percent to the US dollar.

On a year-on-year basis, the peso weakened by about 17.8 percent, the Thai bath by 13.33 percent, the Indonesian rupiah by 23.33 percent, the Australian dollar by 13.48 percent, New Zealand dollar by 12.17 percent, British pound by 6.23 percent and Euro money by 8.89 percent.

Currency traders said that with the absence of good news, the peso is likely to stay at the support level of P52 but will be testing the resistance level of P52.50 versus the dollar.

Last Friday, the peso closed at P52.21, one centavo weaker than the previous day’s close of P52.20. Trading volume was thin at $74.5 million.

With the weak peso and emerging inflationary pressures, Buenaventura said the BSP will not cut its key policy rates even if the US Federal Reserve Committee trims its own key rates by 50 basis points this month.

This, on the other hand, is expected to influence the yield on Treasury bills to be auctioned today.

"T-bills will move sideways in the short-run," Buenaventura said.

Yields on the bellwether 91-day T-bills slipped to a low of 8.653 percent last week as the liquid market parked money into risk-free government securities.

The 91-day T-bill was down 7.6 basis points to 8.653 percent from the previous week’s 8.729 percent. On the other hand, yields for the longer-termed tenors went up. The 91-day bill went up by 8 basis points to 9.78 percent from last week’s 9.7 basis points while the yield on the 363-day bill was even higher by 14.2 basis points to 10.965 percent compared to 10.8 percent the other week.

Government securities traders said T-bill rates are expected to increase, especially for longer-termed tenors if the BSP keeps its word that it will keep key rates steady for the time being.