BSP props up peso in heavy trade

The peso recovered yesterday from a record closing low of 55.50 to $1 on talk the Bangko Sentral ng Pilipinas (BSP) had intervened to defend the currency that has been battered by outflows due to rising political concerns.

At the Philippine Trading System (PDS), the peso managed to hit a high of 55.300 before the midday trading break, recovering from a 55.590 low that took it within striking distance of a January 2001 record low of 55.750 to $1.

The peso regained 15 centavos to close at 55.350 from Monday’s all-time closing low of 55.50 to the dollar. Volume traded was heavy at $213.50 million.

The head of trading at a Manila-based bank said the BSP had sold dollars worth $30 million to prop up the peso. "Plus last week’s dollar demand is not there and the exporters are cashing in on the peso weakness," he said.

However, Bangko Sentral ng Pilipinas (BSP) Governor Rafael B. Buenaventura said the BSP had not intervened in the market. "This is really end of month corporate requirements and short-covering due to all the political noise going on," Buenaventura said.

The BSP chief also said the market’s initial reaction to the political uncertainty was to cover their short position, causing the weakening of the peso against the dollar.

"But as soon as the market saw that the situation was not as bad as they had originally anticipated, some of the tension went down," Buenaventura said.

He said Monday’s plunge was an over-reaction to the perceived crisis that would be precipitated by Supreme Court Chief Justice Hilario Davide’s impeachment.

"These political noises had an impact on the exchange rate but if you look closely, they’re not really the primary factor," Buenaventura said. "The primary factor was still the supply and demand situation which was aggravated by the political noise."

Among Asia’s weakest currencies this year, the peso has been hurt by fiscal and political instability.

The peso shed P1 or 1.7 percent of its value in the past week, initially on dollar buying to fund a commercial deal and later on worries of a fresh political crisis.

Traders also said there was heavy dollar buying to fund a telecommunications deal, in which the European telecom giant Deutsche Telekom AG sold its entire stake of 24.8 percent in the Globe Telecom Inc. to co-owners Ayala Corp. and Singapore Telecommunications Ltd. (Singtel).