DAVIDE IMPEACHMENT, FPJ ALSO AFFECTING INTEREST RATES; PESO SKIDS ANEW
MANILA, OCTOBER 28, 2003 (MALAYA) By PEARL O. BANTILLO - The peso yesterday dropped to 55.55 to the US dollar pulled down anew by investor nervousness due to the impeachment of Chief Justice Hilario Davide and the specter of another movie actor running for president.
The peso nears the historic low of 55.75 to the dollar reached at the height of impeachment proceedings against deposed president Joseph Estrada.
Share prices were also down (please see page 10) and the bellwether interest rate also picked up.
Yellow streaked along investors' spines as the Davide impeachment was seen as indicator of how volatile the political situation will be in the run-up to the national elections.
Bangko Governor Rafael Buenaventura said the peso's weakness was largely due to political noise, which may have delayed inward remittances of dollars from overseas Filipino workers and unfortunately speeded up outflows.
"I definitely believe it is an over-reaction and it should go back to more normal levels once this thing comes to pass," Buenaventura said referring to the impeachment row.
Traders also pointed out that the sale of the stake of German Duestche Telekom in Globe Telecom translated into a $300-million dollar outflow leaving less foreign exchange to support the peso.
BSP deputy governor Amando Tetangco said the central bank stayed at the sidelights but kept a vigilant watch.
The peso traded at a 20-centavo range from a high of 55.35 and a low of 55.55 before settling at a closing rate of 55.50. It averaged 55.490 to the dollar yesterday.
Total volume of transactions at the Philippine Dealing System (PDS) increased again to $204 million.
Huge corporate demand has been driving the peso down over the past few days but it has not reached panic level to warrant an intervention from the central bank, government officials said.
Meanwhile, the 91-day t-bill rate went up by 33.7 basis points to 5.966 percent, the 182-day t-bill rate was up by 29.2 bps to 7.055 percent and the 364-day t-bill rate higher by 54.8 bps to 7.884 percent compared to previous auction results.
National Treasurer Sergio Edeza noted that the political noises add to the upward pressure on interest rates as the markets factor in the uncertainty in the run up to the elections.
The uncertainties include the yet unknown decision of action star Fernando Poe Jr. to run for president in a more real push for interest rates to go up was the narrowing of the gap between the central bank's overnight policy rate at 6.75 percent and the benchmark interest rate.
Reported by: Sol Jose Vanzi
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