Peso closes at 44.89 to $1

MANILA, Philippines - The peso broke into the 44-to-$1 level yesterday, climbing to its strongest level in almost three months as investors start to position to the retal Treasury bond (RTB) issuance of the National Government next week as well as the proposed peso-denominated global bonds, traders said.

The peso gained 13 centavos to close at 44.890 to $1 yesterday from 45.02 to $1 last Thursday. This was the peso’s strongest level since it closed at 44.76 to $1 last May 14.

The local currency opened weaker at 45.05 to $1 before hitting an intra-day high of 44.83 to $1. Trade at the Philipping Dealing and Exchange Corp. remained brisk as $1.52 billion changed hands compared to Thursday’s $1.249 billion.

Standard Chartered Bank economists Vincent Tsui and Simon Wong said the peso continue to strengthen against the dollar as the country’s economy remain insulated from the global crisis and it tends to be strongest in the third and fourth quarters ahead of the Christmas Season.

“The Philippines should be relatively insulated from the global slowdown we expect during the remainder of 2010 given its low ratio of exports to GDP,” Tsui and Wong said.

According to them, the reforms to be undertaken by the administration of President Aquino to address structural bottlenecks is positive for the Philippine peso.

Standard Chartered Bank sees the peso averaging 45.50 to $1 instead of 46.50 to $1 in the third quarter and 44.50 to $1 in the fourth quarter of the year.

Currency traders also cited the positioning of investors on the planned sale of RTBs as well as the peso-denominated global bonds by the National Government to raise much needed funds to plug the country’s yawning budget deficit that is expected to balloon to P325 billion or 3.9 percent of GDP this year from the record level of P298.5 billion or 3.9 percent of GDP last year.

The Philippines is eyeing to sell at least $500 million worth of peso-denominated global bonds for refinancing needs and to support budgetary requirements. On top of this, the government intends to raise at least P100 billion from the sale of RTBs that would be priced on August 10.

Another trader also cited the strong inflows into the Philippines as the country’s gross international reserves (GIR) surged 21 percent to hit $48.6 billion as of end-July this year from $40.169 billion as of end-July last year.