Peso hits 40-month high of 51.57:$1

Buoyed largely by a positive economic outlook following reports that the largest pension fund in the US has raised the Philippines’ investment ranking coupled with the President’s decision to shuffle her Cabinet, the peso rose to its strongest level in 40 months, hitting an intra-day high of 51.570 to a dollar at yesterday’s trading at the Philippine Dealing System (PDS).

The peso managed to gain momentum at the end of the trading session, closing 30.5 centavos higher at 51.605 to the dollar compared to Friday’s close of 51.91 to $1. Yesterday’s closing rate was the highest since the peso last touched the 51.510 level on Aug. 5, 2002. Transaction volume was heavy at $635.5 million.

Analysts said speculation that global investors will increase demand for the local currency to buy the new stock of First Gen Corp. also boosted the peso against the dollar.

The currency also rose as global investors bet on faster economic growth after President Arroyo shuffled her Cabinet.

"There’s the settlement of First Gen Corp.’s IPO, so it’s causing the peso to go higher," said Steven Chang, global markets vice president at State Street Bank & Trust Co. in Hong Kong. "We see some of our clients needing to buy the peso to settle those trades." First Gen Corp. said its investment funds will double to more than $300 million after its initial share sale, giving the power producer more cash to expand and grow its earnings.

The currency may rise beyond 51.70 this week, Chang said.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr said yesterday’s performance of the peso was also due to the sustained inflows from OFWs as well as portfolio investments from foreign investors.

"It isn’t just the actual inflows either, it’s also the market expectations that there will be more inflows due to improving economic conditions and business climate," Tetangco said.

The peso has also benefited since the California Public Employees Retirement System (CalPERS) last week raised the Philippines’ investment ranking. The score rose to 2.13 from last year’s 2, moving the country to 14 this year from 18, beating Malaysia, China, Russia and India, according to a statement from the Department of Foreign Affairs.The score was the highest the country ever achieved, the statement said.

Momentum

"The momentum is still there for the peso to rise,’’ said Rafael Algarra, deputy treasurer at Security Bank Corp. . "The Calpers rating of the Philippines in terms of investment and domestic economic news" strengthened the currency, which may rise to 51.70 this week.

Overseas fund managers last week bought a net P39 billion, the most since the five-day period ended Aug. 26, according to stock exchange figures.

Mrs. Arroyo named House of Representatives Appropriations Committee Chairman Rolando Andaya as budget secretary, the government said in a statement. Andaya will replace Romulo Neri, who will return to his previous post as economic planning secretary, the statement said.

"The country’s doing fine and there’s still inflows into the stock market,’’ said Irene Cheung, a currency strategist in Singapore at ABN Amro NV. ``It’s a relatively strong story."