Peso falls to 46.94:$1, then recovers as BSP steps in

The peso recovered yesterday from its weakest levels in nearly a year after the Bangko Sentral ng Pilipinas (BSP) sold dollars on the market to defend the currency near the 47 to $1 level, traders said.

“They (the central bank) were in earlier at 46.90, but not aggressive,” said a trader.

A second trader also said the central bank was selling dollars in an effort to support the peso, which fell as low as 46.940 to $1 during intraday trading, its weakest level in nearly a year. But despite the BSP’s intervention, the peso still ended 28.50 centavos lower at 46.825 from Thursday’s close of 46.540 to the dollar.

Total trading volume amounted to $889.50 million on an average rate of 46.841 to $1.

The peso has been dropping steadily as the market awaited the release of the August inflation data but some traders said there was some degree of relief after learning that the inflation rate is still within the projection of the BSP.

BSP Governor Amando M. Tetangco Jr. told reporters that inflows were in the market as well, providing support for the peso.

Analysts said the market expects the peso to consolidate after dropping to its weakest level in a year, with further losses to be limited by remittances from overseas Filipino workers.

Merrill Lynch earlier said sentiment toward Asian currencies had deteriorated abruptly since late July with the recent   dollar bounce coinciding with renewed Asian growth concerns.

“At the same time, the markets are disappointed with the relatively muted tightening in response to inflation pressures,” Merrill Lynch said.

“Intervention would also have the effect of keeping imported inflation in check,” Merrill Lynch said.

Asian markets are faced with the challenge of the strong dollar and growth concerns but Merrill Lynch said earlier that the BSP should have an easier time stemming the weakness of the peso.