MANILA, April 30, 2004 (STAR) By Des Ferriols - Pushed by month-end corporate demand for the dollar, the peso weakened back to 56 to $1 level yesterday after almost two weeks of relative strength which allowed the local currency to recover some of its lost ground since the start of the year.

Trading at the Philippine Dealing System (PDS) was heavy, reaching $234.5 million with corporate dollar users crowding the market.

The Bangko Sentral ng Pilipinas (BSP) said the latest weakness was expected because corporate dollar users normally scamper for dollars at the end of every month.

BSP Deputy Governor Amando Tetangco Jr. said the dollar was also recovering some of its strength, adding to the demand pressure that weakened the peso.

The peso opened at 55.82 but quickly lost ground, ending at the intra-day low of 56 to the dollar, a level that the currency has not seen in almost two weeks.

Traders at the PDS said the month-end demand was aggravated by the pent-up demand mostly from oil companies which held back their dollar buying in anticipation of further strengthening of the peso.

"They waited and waited until its too late," said one trader. "At the last minute, all of them started buying at the same time and thatís how the peso weakened again yesterday."

The BSP said it was expecting the peso to remain stable provided there were no more internal or external shocks that would impact on investor confidence and perception.

Traders said the market showed mild optimism about the latest survey results that placed President Arroyo ahead of her chief rival, Fernando Poe Jr.

Traders said this continued to add strength to the peso, abating what could have been a large depreciation.

Regardless of who wins the presidency, traders said the peso and bond markets would recover dramatically after the election once the political uncertainty over leadership has been removed.

However, some foreign banks said the peso could plummet to as low as 57 to the dollar should the elections become unstable and discredited.

The BSP said earlier that the peso could recover to 54 to the dollar but foreign banks were even more optimistic, saying that the peso could bounce back to early 2003 level of 52 to the dollar.

The peso has already begun recovering since this week, appreciating to as high as 55.66 to the dollar for the first time since January when the currency started dipping to record lows almost every week.

Reported by: Sol Jose Vanzi

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