Expressing optimism that the market would eventually calm down in the wake of the impending US-Iraq war, BSP Governor Rafael B. Buenaventura told reporters that the weakness of the peso against the dollar is largely temporary.
"I’m convinced that the weakness is temporary," Buenaventura said, adding that "when the geopolitical situation is resolved, whichever way, it’ll go back to normal."
"Normal,"according to Bue-naventura, is an exchange rate of 52 to 53 to the dollar, well within the projected rate for 2003 of 52 to 54 to $1.
According to Buenaventura, the market has begun to calm down yesterday as nerves settled down in the wake of the initial panic caused by the developments at the United Nations Security Council meetings.
At the Philippine Dealing System (PDS), the peso continued to appreciate for the second day in a row, regaining another 2.5 centavos to close at 54.225 from Thursday’s close of 54.250 to the dollar. Total volume traded amounted to $67.60 million on an average of 54.238 vis-a-vis the dollar.
Buenaventura said the peso’s correction in the past two days was due in part to the news that the US-based California Public Employees Retirement Fund (CalPERS) has retained the Philippines in its list of "permissive countries."
"The first quarter of the year is always unique because historically, dollar inflows from overseas Filipino workers is at its lowest level," Buenaventura said. "The market assumes that our reserves would not be as strong as it normally is during the rest of the year, " Buenaventura added.
This past week, Buenaventura said the peso reacted mostly to the Middle East crisis which was aggravated by the decision of the Paris-based Financial Action Task Force to sanction the Philippines.
Buenaventura said the market also has lingering concerns over the government’s fiscal situation which he expects to haunt the movement of the peso for the rest of 2003.