MANILA,  January 29, 2004 (STAR) By Des Ferriols - The shaky peso succumbed to heavy corporate buying yesterday, plummeting to a new all-time closing low of 55.90 to the dollar, or a sharp 15-centavo fall from Tuesday’s close of 55.75 to the dollar.

Yesterday’s closing rate brought the currency closer to the dreaded 56 to $1 mark which traders have been predicting to happen before the general elections are concluded in May.

The peso plunged to a record low of 55.92 to the dollar in early trade last Tuesday but recovered and closed at 55.75 even as Moody’s Investor Service downgraded the country’s rating by a notch on worries over a heavy debt load and political risks.

At the Philippine Dealing System (PDS), the peso opened weak at 55.75 to $1, tumbling immediately to 55.90 level due to heavy buying by oil and power companies that need dollars to pay for their imports.

Traders said the heavy demand for dollars was exacerbated by the lingering pessimism in the market, causing the peso to weaken further at yesterday’s trade.

The Bangko Sentral ng Pilipinas (BSP) said yesterday’s trading at the PDS was just as the usual at month’s end when corporate dollar users normally beef up their reserves.

"These are mostly oil and power companies, some electronics companies that have to regularly import their raw material requirements," BSP Deputy Governor Amando Tetangco Jr. said. "We didn’t see anything extraordinary, it just happened that there was heavy demand at the time when the peso was already volatile."

Tetangco said that during the morning trade, heavy buying was led by telecommunication companies and in the afternoon, oil companies went into the market to buy more greenback.

Tetangco said there were also exporters selling dollars in the market but the volume was not enough to offset the demand. "There were some inflows too, but not that much," he said.

On the other hand, traders said they were not surprised that the peso sank to another all-low, saying that the exchange rate could go even lower since companies have to cover their positions before the weekend.

Traders said the peso will take time to recover and even if it does, it will not do so until after the May elections and a new administration has been installed and political stability is restored.

"Right now, its all about the devil that we don’t know," said one trader. "It’s not a clear-cut competition (for presidency) and there are no indications of how any of the possible presidents intend to run the country."

Even the BSP admitted early on that the peso would gyrate wildly this year, putting a wide range of 54 - 56 to the dollar for the whole of 2004.

Reported by: Sol Jose Vanzi

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