Peso closes in on 47:$1

The peso continued to rally yesterday, nearly touching the 47-to-a-dollar level as it hit an intraday high of 48.090 to $1.

At the Philippine Dealing System (PDS), the peso closed 15 centavos higher at 48.10 from Thursday’s close of 48.25 to $1. Yesterday’s close was the highest since March 14, 2001 when the currency last touched the 48.20- to-a-dollar level.

Analysts said the continued strength of the peso was due in part to the strengthening of regional currencies against the dollar as a result of stronger-than-expected Japanese economic growth. They also said that yesterday’s performance was fueled by the upgrade of the country’s ranking in the closely watched investment list of US pension fund, California Public Employees Retirement System (CalPERS).

Since Wednesday, the peso has appreciated by 40 centavos. A total of $439 million was traded yesterday at the PDS.

BSP Governor Amando M. Tetangco Jr. said the peso continued to display impressive performance on equity/custody-related inflows and remittances from overseas Filipino workers (OFWs).

According to Tetangco, the market is still celebrating reports that CalPERS had raised its ratings on the Philippines.

Dealers said the exchange rate was heavily affected by strong foreign exchange inflows into the stock market where investments have been drawn by higher yields against the declining rates in the government securities market.

With so much funds searching for investment havens, inflows have been strong in the stock market, especially since government borrowing was programmed to drop dramatically this year, resulting in record-low rates in the treasuries market.

Tetangco observed that trading had been thick and brisk because of large offshore inflows, remittances from overseas Filipino workers and export receipts.

Dealers said the sustained improvement in the country’s economic fundamentals would give the BSP enough space to rethink its monetary policy settings and consider cutting its overnight borrowing and lending rates in the light of easing inflation pressures.

With more dollars coming in, including remittances from OFWs, the peso is expected to not only sustain its strength but possibly to continue appreciating all throughout the year.

According to some dealers, the market was also awaiting the next move of the BSP which has been hinting that the economy is ripe for the full liberalization of foreign exchange policies.