Is peso being propped up against dollar?

Is the peso being propped up againt the dollar?

This possibility surfaced yesterday as the peso continued to resist breaching the psychological 54-to-a-dollar barrier despite mounting pressure from companies building their dollar holdings on rising concern over the possibility of a war in the Middle East.

At the Philippine Dealing System (PDS), the peso managed to close below the 54-to-the-dollar level, settling at 53.980 yesterday or two centavos lower than the previous day’s close of 53.960 to the dollar.

The peso averaged at 53.963 compared with the previous session’s average of 53.932:$1.

Traders said yesterday’s close was the lowest since the peso weakened at 53.950 on July 2001.

"The peso could have hit 54.10 if not for the authorities’ intervention," a currency trader for a foreign bank said.

Dealers estimated the BSP could have unloaded $45 million, or 90 percent of midday trading volume at the PDS. Total volume traded at the end of the trading session amounted to $81.50 million.

Sources said at least $60 million of the total volume came from the BSP through its conduit bank, Chase Manhattan.

Bangko Sentral ng Pilipinas Governor Rafael B. Buenaventura said the peso’s weakening against the dollar was only temporary. "This is very temporary because of war jitters. Obviously, people are hedging," Buenaventura said.

Finance Secretary Jose Isidro Camacho also took the same view, saying that the pressure was due mainly to rising concerns over the possibility of a US-led strike against Iraq.

Both officials, however, declined to comment on reports that the BSP has been in the market to curb speculative attacks on the peso.

"From a fiscal standpoint, we are monitoring it (the peso) very closely," Camacho said.

Traders said investors opted to hold on to their dollars, given the possibility of a US-led attack against Iraq, and possible terror activities in countries allied with the US.