Peso hits 52:$1 as currencies weaken

The peso breached the psychological barrier of 52 to the dollar yesterday on rising political concerns and the general weakness of regional currencies, traders said.

At the Philippine Dealing System (PDS), the peso went over the 52 to $1 barrier, hitting a low of 52.150 before recovering at the end of the trading session to settle five centavos lower than yesterday’s close of 51.910 at 51.960 to $1.

Trading volume amounted to $92 million at an average of $52.062 to $1.

Bangko Sentral ng Pilipinas (BSP) Deputy Governor Amando Tetangco Jr. said the weakness of the peso was due to the general weakness of other regional currencies as well as the short covering of banks which also affected the peso’s trading.

"The negative news is piling up... the peso remains the underperformer in the region," Sameer Goel, Bank of America’s currency strategist said.

Traders also said the recent resignation of two senior government officials have caused political uncertainty. They said the resignation, in particular, of Internal Revenue Commissioner Rene Bañez caused traders to worry about the budget deficit, which reached 90 percent of the full year target of P130 billion in the first half of the year.

"Although the market has long discounted the fact that the Arroyo administration would miss its target deficit for the year, Bañez's resignation added a new dimension to their concerns related to the credibility of the government’s revenue collection efforts," traders said, adding that "the more they delay the numbers the more skeptical and speculative the market is turning," a dealer said.

One local banker said the market was uncertain over who would replace Banez and whether the succession would also translate to higher revenue collection for the BIR.

The banker said, however, that the BIR’s problem was systemic. "If the bureaucracy would resist any attempts to reform the agency, the revenue generating capacity will continue to lag behind the budget requirement," the banker said. – Des Ferriols