, April 14, 2004
By Des Ferriols - The peso rallied yesterday to its highest level in nearly three months after the latest opinion polls showed President Arroyo has moved into the lead for the May 10 presidential elections, dealers said.

At the Philippine Dealing System (PDS), the peso gained another 33 centavos to close at 55.80 to the dollar, the highest since Jan. 27 when the peso was at 55.75 to $1.

As traders dumped their dollar holdings, the day’s trade reached $257.5 million, almost thrice the usual daily volume of $80 to $120 million.

"This was expected as worries over political instability have somewhat abated," Bangko Sentral ng Pilipinas (BSP) Governor Rafael Buenaventura said yesterday.

Buenaventura said there was no more fear of a freefall in the peso less than a month before the country goes to the polls.

"I expect the peso to be rangebound at around 56 to the dollar until election day, after which it should appreciate to the 54-55 per dollar level," Buenaventura said.

Polling company Pulse Asia reported on Monday that Mrs. Arroyo has established a three percentage-point lead over her movie-star and high-school drop-out rival Fernando Poe Jr.

The peso last traded in the 55 to the dollar level two months ago after falling to a record 56.45 in late March on pre-election political concerns.

Currency dealers said the market took Monday’s poll positively.

Poe had unsettled some investors because of his perceived inexperience and his refusal to discuss his economic program in public.

Buenaventura said encouraging economic figures also boosted the peso.

The BSP reported that its foreign exchange reserves rose to $16.306 billion as of end-March, adequate for 4.5 months’ worth of imports, from $15.73 billion at end-February.

"That our international reserves (could) be depleted is no longer a cause of concern given the improved performance of the country’s exports, while prospects look good for the rest of the year," Buenaventura said.

Exports rose 7.5 percent from a year earlier in February, faster than the 4.1 percent increase in January.

"Seasonal inflows of (overseas Filipino workers) remittances, the successful refinancing by (the government) and other (government) agencies, and the precautionary borrowing by the central bank all helped strengthen the peso and removed the specter of the currency’s free fall," Buenaventura added.

Asked if he thinks the peso’s gains are sustainable, Buenaventura said: "The expectation is for a stable peso with some upside." He did not elaborate.

Banks continued to cut their dollar-buying positions after a relatively peaceful five-day Easter break, dealers said.

Although the business and finance sector has refused to be aligned with any candidate or party, traders said an Arroyo victory was assumed as a continuation of the status quo.

"For an investor, the smoother the transition the better," said one trader who declined to be named.

Reported by: Sol Jose Vanzi

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